Asked by EZEKIEL LABRADOR on May 09, 2024
Verified
A bakery shop makes a large sale for $1400 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The bakery shop follows GAAP and applies the revenue recognition principle. When is the $1400 considered to be recognized?
A) December 5.
B) December 10.
C) November 30.
D) December 1.
Revenue Recognition Principle
An accounting principle that dictates the specific conditions under which revenue is recognized or accounted for.
Recognized
Officially identified or acknowledged, typically referring to the formal acceptance of financial transactions within accounting records.
Statement
A record or document summarizing financial transactions over a specified time period.
- Recognize and implement the concepts of revenue and expense recognition.
Verified Answer
LM
Leonardo MartínezMay 10, 2024
Final Answer :
C
Explanation :
Under the revenue recognition principle, revenue is recognized when it is earned and realizable, regardless of when the cash is received. In this case, the bakery earned the revenue on November 30 when the sale was made, so the revenue is recognized on that date.
Learning Objectives
- Recognize and implement the concepts of revenue and expense recognition.