The Revenue Recognition Principle Is a Requirement Under Accrual Accounting

question 36

Multiple Choice

The revenue recognition principle is a requirement under accrual accounting to record revenues when

• A)they are earned,not necessarily when cash is received.
• B)the cash is received,not necessarily when they are earned.
• C)they can be matched to expenses.
• D)None of the choices are correct.

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Definitions:

Operating Assets

Assets that are used in the day-to-day operations of a business to generate revenue.

Return On Investment

A financial metric used to evaluate the efficiency of an investment, calculated as net profit divided by the cost of the investment.

Incentive Compensation

A form of performance-based pay where employees receive additional compensation for meeting or exceeding targets or metrics.

Balanced Scorecard

A strategic planning and management system used for aligning business activities to the vision and strategy of the organization, improving internal and external communications, and monitoring organizational performance against strategic goals.