How Many of the Following Statements Regarding the Revenue Recognition

question 26

Multiple Choice

How many of the following statements regarding the revenue recognition and matching principles are true?
According to the revenue principle, a company should not record the revenue from a transaction until it is actually received in cash.
To ensure revenue reporting is consistent over time, a business adopts a revenue recognition policy that defines the time at which they report revenues from providing goods or services to customers.
The matching principle requires that expenses be determined first and then revenues be "matched" to those expenses.

• A) None
• B) One
• C) Two
• D) Three

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Definitions:

Depreciation Expense

The systematic allocation of the depreciable amount of an asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Correction

A process of adjusting or rectifying errors in financial statements or any documents.

Intangible Assets

Assets that lack physical substance and represent legal rights or competitive advantages (e.g., trademarks, patents).

Physical Substance

A characteristic of certain assets that possess material existence and can be seen, touched, or quantified.