Question

Which of the following is not a reason why revenue is recognized at time of sale?

a. Realization has occurred.
b. The sale is the critical event.
c. Title legally passes from seller to buyer.
d. All of these are reasons to recognize revenue at time of sale.

Answer 1

All the given options are indeed reasons why revenue is recognized at the time of sale, including realization, the sale being the critical event, and the legal passing of title from seller to buyer.

Step-by-step explanation:

The question is related to the concept of revenue recognition in accounting. Specifically, when revenue should be recognized under the accrual basis of accounting. Revenue is generally recognized at the time of sale because:

• Realization has occurred, meaning the earnings process is complete, and an exchange has taken place.
• The sale is the critical event, indicating the earnings process is complete, and performance is accomplished.
• Title legally passes from the seller to the buyer, transferring risks and rewards of ownership.

All of these are valid reasons for recognizing revenue at the time of sale, and therefore none of the options provided are correct as reasons not to recognize revenue at this time.