The Realization Principle Indicates That Revenue Usually Should Be Recognized

question 59

Multiple Choice

The realization principle indicates that revenue usually should be recognized and recorded in the accounting records:

• A)When goods are sold or services are rendered to customers.
• B)When cash is collected from customers.
• C)At the end of the accounting period.
• D)Only when the revenue can be matched by an equal dollar amount of expenses.

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Definitions:

Value Added

The increase in worth of a product or service as a result of a particular process, often characterized by the difference between the price of the finished product and the cost of the inputs involved in making it.

Raw Materials

Basic materials extracted from natural resources or produced through agriculture, which are used in the production of goods and services.

Injection

Any spending other than by households or any income other than from resource earnings; includes investment, government purchases, exports, and transfer payments.

Circular Flow

An economic model that illustrates the continuous movement of goods, services, and money between producers and consumers in an economy.