The Revenue Recognition Principle

question 111

Multiple Choice

The revenue recognition principle

• A) is not in conflict with the cash method of accounting
• B) determines when revenue is credited to a revenue account
• C) states that revenue is not recorded until the cash is received
• D) controls all revenue reporting for the cash basis of accounting

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Definitions:

Certainty Equivalent Factors

Refers to adjustments made to uncertain (risky) cash flows to equate them to certain cash flows, used in investment decision-making.

Risk Adjusted Discount Rate

A rate used in capital budgeting that adjusts for the risk of cash flows, providing a way to account for the riskiness of the project.

NPV

Net Present Value (NPV) is a financial metric used to assess the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period of time.

IRR

The Internal Rate of Return is a financial measurement employed to gauge the potential profit of investments.