Question

Which accounting principle dictates that revenue should be recognized when it is earned and realized, indicating that goods or services have been delivered, and there is reasonable certainty of receiving payment?

a) Consistency principle
b) Materiality principle
c) Realization principle
d) Conservatism principle

Answer 1

The Realization principle is the accounting principle that mandates recognizing revenue when it is earned and there is reasonable certainty of payment upon delivery of goods or services.

Step-by-step explanation:

The accounting principle that dictates that revenue should be recognized when it is earned and realized is the c) Realization principle. This principle states that revenue should be recorded in the period in which the goods or services are delivered, and there is a reasonable certainty of receiving payment. It ensures that the financial statements of a company provide a consistent and accurate picture of its income during the period in question, thereby aligning the revenue with the corresponding expenses incurred in earning that revenue.