Question

According to GAAP, when is revenue recognized on an income statement? Select all that apply

Multiple select questions.
a.after the related expenses are paid in full
b.when the earnings process is virtually completed
c.when the value of an exchange of goods or services is known or reliably determined
d.only when cash has been received for the sale

Answer 1

GAAP revenue is recognized when the earnings process is nearly complete and the exchange value is known, not necessarily when cash is received or expenses are paid.

Step-by-step explanation:

According to Generally Accepted Accounting Principles (GAAP), revenue is recognized on an income statement when certain criteria are met. Primarily, revenue is recognized when the earnings process is virtually completed, and the value of the exchange of goods or services is known or reliably determined. This does not necessarily coincide with when the cash is received, nor does it require that the related expenses are paid in full. Revenue recognition under GAAP does not solely rely on the receipt of cash; therefore, recognizing revenue only when cash is received for the sale is not in accordance with GAAP's revenue recognition principle.