Revenue Is Recognized for Accounting Purposes When a Performance Obligation

question 24

Essay

Revenue is recognized for accounting purposes when a performance obligation is satisfied. In some situations, revenue is recognized over time as the fair values of assets and liabilities change. In other situations, however, accountants have developed guidelines for recognizing revenue at the point of sale.
Required:
Explain and justify why revenue is often recognized at the time of sale.

---

Definitions:

Semantic Memory

A form of enduring memory that enables the recollection of words, ideas, or digits, crucial for language comprehension and usage.

Episodic Memory

A type of long-term memory that involves recollection of specific events, situations, and experiences.

Emotional Memory

The aspect of memory involved in the storage and retrieval of emotional experiences, which are often vivid and persistent.

Decay Theory

The hypothesis that memory fades due to the mere passage of time unless it is actively rehearsed.