According to revenue recognition principles, when is revenue typically recognized?

According to revenue recognition principles, when is revenue typically recognized?

• A. When cash is collected.
• B. When the invoice is issued.
• C. When expenses are paid.
• D. When earned and realizable, typically when services performed or goods delivered.

Answer: (D)

Revenue is recorded when it is earned and realizable, which usually happens when you have delivered the goods or performed the service and there is a reasonable expectation of payment. This follows accrual accounting, linking revenue to the earning event rather than to cash collection. For example, revenue on a credit sale is recognized at delivery or service completion even if payment arrives later. Cash collection is separate from revenue recognition, and simply issuing an invoice or paying expenses does not determine when revenue is recognized.

Revenue is recorded when it is earned and realizable, which usually happens when you have delivered the goods or performed the service and there is a reasonable expectation of payment. This follows accrual accounting, linking revenue to the earning event rather than to cash collection. For example, revenue on a credit sale is recognized at delivery or service completion even if payment arrives later. Cash collection is separate from revenue recognition, and simply issuing an invoice or paying expenses does not determine when revenue is recognized.