Revenue Recognition – True or False

Practice Question

Intro to Financial Accounting
Investing and Financing Decisions
Revenue Recognition
True or False

Revenue is recognized when cash is received, regardless of when the goods were delivered.

Answer +
Final Answer: FALSE
Explanation +

According to the revenue recognition principle, revenue should be recognized when goods or services have been delivered to the customer — not necessarily when cash is received.

This ensures that reported revenue reflects the actual economic activity that took place during a period. It is a key distinction between accrual accounting and cash basis accounting.