Under the Revenue Recognition Principle, a Business Should Record Revenue

question 118

Multiple Choice

Under the revenue recognition principle, a business should record revenue when the business:

• A) receives payment from a customer for goods or services
• B) receives an order from a customer for goods or services
• C) prepares the invoice (bill) for goods or services
• D) delivers goods or services to a customer

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Definitions:

Perpetual Inventory System

This method for accounting inventory immediately notes down any purchase or sale through the use of computerized point-of-sale systems and enterprise asset management software.

FOB Shipping Point

A term indicating that the buyer assumes ownership and responsibility for goods at the seller's location, and pays for shipping costs.

FOB Destination

A shipping term indicating that the seller bears the cost and risk of transporting goods until they are delivered to the buyer's location.

Physical Inventory

The process of counting and verifying the actual stock in a business at a specific point in time.