Question

In general, revenue is recognized when:

1) goods are shipped.
2) it is earned and realized.
3) it is recorded in the sales journal.
4) it is received in cash.

Answer 1

Revenue is recognized when it is earned and realized, not necessarily when goods are shipped, recorded in the sales journal, or received in cash.

Step-by-step explanation:

Revenue is the income that a company or organization generates from its business activities, typically from the sale of goods or services to customers. The recognition of revenue is a key principle in accounting, which determines when a company should record income in its financial statements. In general, revenue is recognized when it is both earned and realized. This principle is often reflected in the accrual accounting method, which dictates that revenue should be recognized when it is earned regardless of when the cash is received.

The idea behind this is that once a good has been delivered or a service has been rendered, and there is reasonable certainty of payment, the company can record the revenue. This approach aligns with the revenue recognition principle included in Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).

It is essential to note that revenue is not necessarily recognized when goods are shipped, when it is recorded in the sales journal, or when it is received in cash, as these events may not coincide with the completion of the earnings process.

Answer 2

Revenue is recognized when it is earned and realized, which means when the goods or services are provided, rather than when cash is received or recorded. The total revenue of a company can be calculated as the product of price and quantity sold, and revenue is also a key component of national income figures.

This correct answer 1

Step-by-step explanation:

In general, revenue is recognized when it is earned and realized. This means that revenue is accounted for when goods or services are provided to the customer, not necessarily when the cash is received or when the transaction is recorded in accounting journals such as the sales journal.

Revenue recognition is a core principle of accrual accounting, which matches revenue with the expenses related to generating that revenue, providing a more accurate picture of a company's financial position than cash accounting.

Total revenue for a company is the income it generates from selling its products, which can be calculated by multiplying the price of the product by the quantity of output sold, as given by the equation Total Revenue = Price x Quantity.

Moreover, revenue is a critical factor in the analysis of national income, which includes all income earned in the form of wages, profits, rent, and profit income.

In the context of government, revenue primarily comes from taxation and is used to fund government programs, operations, and interest on debt.

These funds can also impact economic incentives and resource allocation, as explored in the Economics of Taxation. Governments at all levels, from local to federal, collect taxes to create the revenue necessary for these purposes.

This correct answer 1) goods are shipped.