What is Revenue Recognition Companies should recognize revenue in the accounting period in which a contract is finalized Companies should recognize revenue in the accounting period in which services are performed. O Companies should ecognize revenue when the customer pays its bill

What is Revenue Recognition Companies should recognize revenue in the accounting period in which a contract is finalized Companies should recognize revenue in the accounting period in which services are performed. O Companies should ecognize revenue when the customer pays its bill

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter3: Analyzing And Recording Transactions

Section: Chapter Questions

Problem 9MC: Which of the following is the principle that a company must recognize revenue in the period in which...

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The first step in the revenue recognition process is determining if a contract is in place between the seller and the customer. A contract is an agreement between two or more parties that creates enforceable rights and obligations. The standard states that a contract may be written, oral, or implied by customary business practices. To be a contract, the accounting standard states that it must meet five criteria. Required: Discuss the criteria necessary for a contract to be considered under the revenue recognition process. How would a company account for a contract that does not meet the criteria?
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