BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Should be recorded only when cash is received
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Only need to be reported if it comes from a registered business
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Should be predicted and recorded on the same statement
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Must be earned before it can be included in an income statement
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Detailed explanation-1: -Generally accepted accounting principles (GAAP) require that revenues are recognized according to the revenue recognition principle, a feature of accrual accounting. This means that revenue is recognized on the income statement in the period when realized and earned-not necessarily when cash is received.
Detailed explanation-2: -GAAP stipulates that revenues are recognized when realized and earned, not necessarily when received.
Detailed explanation-3: -The matching principle is part of the Generally Accepted Accounting Principles (GAAP), based on the cause-and-effect relationship between spending and earning. It requires that any business expenses incurred must be recorded in the same period as related revenues.
Detailed explanation-4: -The revenue recognition principle, a key feature of accrual-basis accounting, dictates that companies recognize revenue as it is earned, not when they receive payment.
Detailed explanation-5: -IAS 18 Revenue outlines the accounting requirements for when to recognise revenue from the sale of goods, rendering of services, and for interest, royalties and dividends.