Final answer:
Revenue is recognized when an entity satisfies a performance obligation, which means providing the agreed-upon goods or services. Total revenue is calculated as Total Revenue = Price x Quantity. Understanding when to record revenue is crucial for accurately reporting a company's income. Option B is the correct answer.
Step-by-step explanation:
Revenue recognition is a key principle in accounting that determines when a company should record income. The correct answer to the question, 'In general, revenue is recognized when:', is B) an entity satisfies a performance obligation. This means when a company has provided a product or service that fulfills a contractual duty to a customer, it is able to recognize the revenue.
Total revenue is defined as the income a firm generates from selling its products, which is calculated by Total Revenue = Price x Quantity. Revenue is not just dependent on cash received or when goods are shipped, but on meeting the criteria of having transferred control of goods or services to the customer.
Revenue recognition ties closely with the demand for the firm's products and the costs involved in producing and selling them. It is essential to understand that revenue growth over time can be attributed to various factors, such as inflation and population growth, which have caused an exponential increase post-World War II.