Final Answer:
When goods or services are exchanged for cash or claims to cash (receivables), revenues are recognized. Thus, the correct answer is option c. recognized.
Step-by-step explanation:
Revenue recognition is a critical accounting principle that determines when a company should recognize revenue in its financial statements. The correct answer to the question is "c. recognized." Revenue is considered recognized when goods or services are delivered to customers, and the company can reasonably expect to receive payment. This recognition signifies that the earnings process is complete, and the revenue can be reported in the financial statements.
In the context of accounting, earning revenue involves two key criteria: realization and recognition. Realization refers to the actual receipt of cash or a claim to cash (receivables). Recognition, on the other hand, involves formally recording the revenue in the accounting records. Therefore, when goods or services are exchanged for cash or claims to cash, the revenue is both earned and realized, leading to the recognition of revenue.
In summary, the recognition of revenue is a pivotal concept in accounting, representing the formal acknowledgment of earned revenue when goods or services are exchanged for cash or claims to cash. This ensures accurate and transparent financial reporting, allowing stakeholders to assess a company's financial performance and position. Therefore, the correct answer is option c. recognized.