Question

Under GAAP, revenues are to be recognized in the period in which those revenues are earned and not necessarily in the period in which cash is actually received from a customer.

A.True
B.False

Answer 1

Under GAAP, revenues are recognized in the period they are earned, not when cash is received.

Step-by-step explanation:

Revenues are to be recognized in the period in which those revenues are earned and not necessarily in the period in which cash is actually received from a customer. This statement is true. Under Generally Accepted Accounting Principles (GAAP), revenue recognition is based on the principle of accrual accounting. Accrual accounting recognizes revenues when they are earned, regardless of when the cash is received. This is done to provide a more accurate picture of a company's financial performance.