Question

Which of the following is not one of the five steps for recognizing revenue?

a) Identify the separate performance obligation(s) in the contract
b) Identify the contract with a customer
c) Allocate the transaction price to the separate performance obligations
d) Recognize revenue when all the performance obligations have been satisfied

Answer 1

The question asks about the five-step revenue recognition process in accounting. The option that is not part of these steps is 'Recognize revenue when all the performance obligations have been satisfied.' Revenue should be recognized when each individual performance obligation is satisfied.

Step-by-step explanation:

The question pertains to the revenue recognition principle in accounting, which is a crucial concept for business and finance students. The steps for revenue recognition are outlined in the Accounting Standards Codification (ASC) 606 by the Financial Accounting Standards Board (FASB).

The correct five steps for recognizing revenue are as follows:

1. Identify the contract with a customer.
2. Identify the separate performance obligation(s) in the contract.
3. Determine the transaction price.
4. Allocate the transaction price to the separate performance obligations.
5. Recognize revenue when (or as) each performance obligation is satisfied.

The option not listed above and, therefore, not one of the five steps is (d) Recognize revenue when all the performance obligations have been satisfied, as revenue can be recognized when each performance obligation is satisfied, which may occur at different times depending on the contract.