Recording Revenues Before They Are Earned Overstates Current-Period Income; Recording

question 99

True/False

Recording revenues before they are earned overstates current-period income; recording revenues in periods after they have been earned understates the recording period's income.

---

Definitions:

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of all relevant facts and neither being under compulsion to buy or sell.

Unrealized Increase

The increase in value of an asset that has not yet been sold or cashed in, thus not yet resulting in actual income.

Recognition

In accounting, recognition refers to the process of including an item in the financial statements of an entity, acknowledging it as an asset, liability, revenue, or expense.

Unrealized Holding

Refers to the increase or decrease in the value of an investment that has not yet been sold by the holder.