Revenue Is Properly Recognized

question 12

Multiple Choice

Revenue is properly recognized:

• A)When the customer makes an order.
• B)Only if the transaction creates an account receivable.
• C)At the end of the accounting period.
• D)Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.
• E)When cash from a sale is received.

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Definitions:

Deferred Tax Asset

An accounting term used to describe a situation in which a company has paid more taxes to the government than it has actually owed during a given period.

Deferred Tax Liability

A tax obligation arising from temporary differences between accounting and tax treatments of certain items, to be paid in the future.

Tax Deductible

Expenses that are subtracted from gross income to reduce taxable income, leading to a decrease in the amount of taxes owed.

Operating Expenses

Costs associated with the day-to-day operations of a business, excluding the cost of goods sold.