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    Question

    The 'Revenue Recognition' principle requires that

    revenue should be recognized when:
    A A contract is signed. Correct Answer Incorrect Answer
    B It is earned and realizable, regardless of when cash is received. Correct Answer Incorrect Answer
    C The cash is received from the customer. Correct Answer Incorrect Answer
    D The product is manufactured. Correct Answer Incorrect Answer

    Solution

    The Revenue Recognition Principle, a core component of accrual accounting, states that revenue is recognized when it is earned (the service is performed or the product is delivered) and when it is realizable (when there is a reasonable certainty of payment), not necessarily when cash is received.

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