**Understanding the Current Revenue Recognition Principle**The image displays a multiple-choice question designed to test knowledge of the current revenue recognition principle in accounting. It provides four possible answers, asking which one best describes this principle.1. **Recognize revenue in the accounting period when the performance obligation is satisfied.**2. **Recognize revenue in the accounting period when cash is received.**3. **Recognize revenue when it is earned.**4. **Identify separate performance obligations in the contract.**The question focuses on determining the correct timing and criteria for recognizing revenue according to modern accounting standards, specifically those outlined by the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). The principle aims to ensure that revenue is accurately reported in relation to when a business has fulfilled its contractual obligations, rather than relying solely on cash transactions.

Revenue means the amount earned by selling the goods or services. Revenue is recognized in books of…

Answered: Which of the following best describes…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

Explain a principal-agent relationship and its significanceto revenue recognition.
According to Generally Accepted Accounting Principles (GAAP), revenue is recognized as income when: a contract is signed to perform a service or deliver a good. managers decide to recognize it. payment is requested. income taxes are paid on the revenue earned. the transaction is complete and the goods or services are delivered.
According to U.S. GAAP, when should revenue be recognized?a. When cash is received from the customerb. When the service is performed or the goods have been delivered to the customerc. When the goods or services have been priced and offered for saled. At the stated date in the contract
Each economic event or transaction will have a dual effect on financial position. Explain what is meant by this dual effect. and please describe how revenue recognition relates to transferring goods or services.
Which of the following conditions would support recognition of revenue? The seller’s price to the buyer is being negotiated. Delivery has occurred or services have been provided. Collection is possible. Significant risks and rewards of ownership of the goods will soon be transferred to the purchaser by the seller.
Explain the function of the receiving department in the revenue cycle.
On April 1, Jiro Nozomi created a new travel agency. Adventure Travel. The following transactions occurred during the company's first month. April 2 Nozomi invested $39,000 cash and computer equipment worth $30,000 in the company. April 3 The company rented furnished office space by paying $2,400 cash for the first month's (April) rent. April 4 The company purchased $1,900 of office supplies for cash. April 10 The company paid $2,100 cash for a 12-month insurance policy. Coverage begins on April 11. April 14 The company paid $1,800 cash for two weeks' salaries earned by employees. April 24 The company collected $8,500 cash for commissions revenue. April 28 The company paid $1,800 cash for two weeks' salaries earned by employees. April 29 The company paid $400 cash for minor repairs to computer equipment. April 30 The company paid $1,450 cash for this month's telephone bill. April 30 Nozomi withdrew $2,400 cash from the company for personal use. The company's chart of accounts follows:…
The five steps in the revenue recognition process are: Identify the contract(s) with customers. 2. 1. lidentify the separate performance obligations in the contract. 3. Determine the Delivery Date 4. Allocate the transaction price to the separate performance obligations. 5 Recognize revenue when each performance obligation is satisfied. O True False
The FASB has established a Five-Step process to recognize revenue. Which of the following is not one of those steps? A. Ability to identify the contract with the customer. B. Determination thatcollection of the entitled contractual consideration from the customer is probable. C. Properly identify all of the performance obligations within the contract. D. Ability to determine the transaction price. E. Properly identify all of the deliverables and allocate the transaction price to each.
An encumbrance represents the estimated future liabilities for goods or services resulting from placing a purchase order or signing a contract. a. True b. False
Define ‘control’ and state what would be the acceptable indicators for the transfer of control from the seller to the customer when the performance obligation is satisfied at a point in time according to IFRS 15-Revenue from Contracts with Customers.
Revenue generally should be recognized Select one: when realized. when the performance obligation is satisfied. at the time of cash collection. at the end of production.

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