What Does the Phrase "Revenue Is Recognized at the Point

question 18

Multiple Choice

What does the phrase "Revenue is recognized at the point of sale" mean?

• A)Revenue is recorded in the accounting records when the goods are received from a supplier and reported on the income statement when sold to the customer.
• B)Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer.
• C)Revenue is recorded in the accounting records when the goods are sold to a customer and reported on the income statement when the cash payment is received from the customer.
• D)Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.

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Definitions:

Profit Potential

The capacity or likelihood for a business venture to generate earnings over costs.

Balance Sheet Method

A financial accounting strategy for valuing assets or determining net worth by comparing what is owned to what is owed.

Holdback Money

Funds retained by one party in a transaction as security or leverage until certain conditions are met.

Tax Liabilities

Financial obligations imposed by governments that are required to be paid, such as income tax, corporate tax, and sales tax.