Question

When is revenue recognized on an income statement?

a. after the related expenses are paid in full
b. when cash has been received for the sale
c. when the exchange of goods or services is completed
d. when the earnings process is virtually completed

Answer 1

Revenue is recognized on an income statement when the earnings process is virtually completed, irrespective of the receipt of cash or full payment of expenses.

Step-by-step explanation:

Revenue is recognized on an income statement when the earnings process is virtually completed. This means that the company has substantially performed its obligations under the terms of the sale, and there are no significant uncertainties remaining. It is important to note that revenue recognition does not necessarily require the receipt of cash or the completion of all related expenses. Instead, it focuses on the completion of the earnings process.