Which of the following is not a criterion to recognize revenue under GAAP? A. The earnings process must be completed. B. A product or service must be provided. C. Cash must be collected. D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process.
Which of the following is not a criterion to recognize revenue under GAAP? A. The earnings process must be completed. B. A product or service must be provided. C. Cash must be collected. D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process.
Which of the following is not a criterion to recognize revenue under GAAP?
A. The earnings process must be completed.
B. A product or service must be provided.
C. Cash must be collected.
D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process.
Expert Solution & Answer
To determine
Concept introduction:
Financial accounting or reporting is used to prepare financial statements to present the financial position of the entity. Financial accounting is mandatory for an entity and it follows Generally Accepted Accounting Policies (GAAP) for accounting. The statements produced under financial accounting include the Income statement, balance sheet and statement of cash flows. Users for financial information can be internal as well as external like lenders, creditors, government, employees, and owners etc.
To choose:
The correct option.
Answer to Problem 1MC
Cash must be collected
Explanation of Solution
Explanation for correct answer:
Collection of the cash is not a criterion to recognize revenue under GAAP. Hence, the correct option is C.
Explanation for incorrect answers:
A. This is one of the criteria to recognize revenue under GAAP. Hence, this option is incorrect.
B. This is one of the criteria to recognize revenue under GAAP. Hence, this option is incorrect.
D. This is one of the criteria to recognize revenue under GAAP. Hence, this option is incorrect.
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The principle of revenue recognition results in:
a. recording revenue in the income statement
b. recording realized revenue when it is earned
c. measuring relevant and reliable information whenever a transaction has occured.
d. assuring the existence of all amounts recorded as net income
Question: Which accounting principle states that revenue should be recognized when it is earned and
expenses when they are incurred?
a. Matching principle
b. Revenue recognition principle
c. Conservatism principle
d. Time period principle
Under the general rule of revenue recognition, revenue is recognized when
Group of answer choices
A.all related expenses have been incurred.
B.a contractual agreement exists, and cash collection is assured.
C.the earnings process is complete, and a valid promise of payment has been received.
D.marketability and market price are assured.
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