Chapter 17, Problem 1GI

To determine

State the core principle of revenue recognition.

Explanation of Solution

Revenue recognition principle:

Revenue recognition principle states that every business organization should recognize the revenue when it is earned, no matter, cash related to that obligation is received or not.

The “core principle of revenue recognition” is that a reporting entity must recognize revenue to represent the transmission of goods or services promised to customers in an amount that reveals the concern to which the entity anticipates to be authorized in exchange for those goods or services.