Problem
What is the revenue recognition principle and when is revenue considered recognized?
A. Under U.S. GAAP, the revenue recognition principle is used to guide the timing of revenue recognition. It states that revenue is recognized when it is realized or realizable and earned. An item is considered realized orrealizable when a good or service has been exchanged for cash or claims to cash. Revenues are considered earned "when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues."
B. Under U.S. GAAP, the revenue recognition principle is used to guide the timing of revenue recognition. It states that revenue is recognized when it is realized or realizable and earned. An item is considered realized orrealizable when "when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues." Revenues are considered earned when a good or service has been exchanged for cash or claims to cash.
C. Under U.S. GAAP, the revenue recognition principle is used to determine whether or not revenue should be recognized. It states that revenue is recognized when it is earned. An item is considered earned when a good or service has been exchanged for cash, or when the company receives the right to bill with the expectation that the customer will pay the amount billed.
D. Under U.S. GAAP, the revenue recognition principle is used to determine whether or not revenue should be recognized. It states that revenue is recognized when it is realized. An item is considered realized when a good or service has been exchanged for cash.