The Revenue Recognition Principle Dictates That Revenue Should Be Recognized

question 72

Multiple Choice

The revenue recognition principle dictates that revenue should be recognized in the accounting records

• A) when cash is received.
• B) when the performance obligation is satisfied.
• C) at the end of the month.
• D) in the period that income taxes are paid.

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Definitions:

Prepaid Rent

Payments made in advance for rent, which is recorded as an asset initially and then expensed over the period the payment covers.

Adjusting Journal Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Accrual

A method in accounting that recognizes financial events by matching revenues with expenses at the time the transaction occurs, not when payment is made or received.

Supplies Expense

The cost associated with the consumable items used in the operation of a business, such as office supplies or cleaning materials.