The Revenue Recognition Principle

question 157

Multiple Choice

The revenue recognition principle:

• A)Prescribes that accounting information is based on actual cost.
• B)Provides guidance on when a company must recognize revenue.
• C)Prescribes that a company report the details behind financial statements that would impact users' decisions.
• D)Prescribes that a company record the expenses it incurred to generate the revenue reported.
• E)Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

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Definitions:

SEC Regulation

A set of rules and guidelines issued by the U.S. Securities and Exchange Commission to protect investors and maintain fair and orderly functioning of the securities markets.

Transparency

The degree to which a company's actions are observable, understandable, and disclosed to the outside world, especially to investors.

Advertise

To announce or promote a product, service, or event publicly to encourage commercial interest.

Investors

Individuals or entities that allocate capital with the expectation of receiving financial returns.