Question

Neither the seller nor the customer have performed any obligation under a written agreement. What additional condition would disqualify this as a contract for purposes of revenue recognition?

a) Lack of legal formality
b) Lack of enforceability
c) Lack of consideration
d) Lack of mutual consent

Answer 1

The lack of enforceability is the additional condition that would disqualify a written agreement as a contract for revenue recognition, as it ensures both parties are obligated to fulfill their roles. option b is answer

Step-by-step explanation:

The additional condition that would disqualify the scenario described as a contract for purposes of revenue recognition is b) Lack of enforceability.

For revenue to be recognized under a contract, the arrangement must give rise to rights and obligations that are enforceable. If either party can unilaterally terminate the agreement without penalty or if the terms are so vague that enforcement is impractical, the contract may lack enforceability.

Besides enforceability, a valid contract must also include legal formality, consideration, and mutual consent. However, without enforceability, there is no assurance that each party will fulfill their obligations, which is crucial for recognizing revenue in accounting. option b is answer