Under the Revenue Recognition Principle,a Business Should Record Revenue When

question 31

Multiple Choice

Under the revenue recognition principle,a business should record revenue when the business:

• A) receives an order from a customer for goods or services
• B) prepares the invoice (bill) for goods or services
• C) delivers goods or services to a customer
• D) receives payment from a customer for goods or services

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Definitions:

Initial Franchise Fee

An upfront cost that a franchisee pays to a franchisor for the rights to use the brand and operate under the franchise agreement.

Recorded as Revenue

The recognition of income when earned by the company, typically upon delivery of goods or completion of services.

Installment Sales Method

The installment sales method is an accounting technique used to recognize revenue and expenses for sales made on credit, wherein income is recognized as installment payments are received.

Recognizing Profit

The process of formally acknowledging and recording income on the financial statements when it is earned, regardless of when the cash is received.