Revenue is generally recognized as being earned at that point of time when?
Correct answer: D. sale is effected
- A. debts are collected
- B. cash is received
- C. production is completed
- D. sale is effected
Explanation
Under the traditional realization principle, revenue is recognized when the sale is made and the earning process is substantially complete, not when cash is later collected. Cash receipt and debt collection concern settlement of the receivable.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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