Revenue Recognition – True or False

Practice Question

Intro to Financial Accounting
Sales Revenue, Receivables, and Cash Management
Revenue Recognition
True or False

Sales revenue is recognized when cash is received, regardless of the delivery of goods.

Answer +
Correct Answer: FALSE
Explanation +

According to the revenue recognition principle, revenue is recognized when it is earned — that is, when the goods are delivered or services are rendered — regardless of when the cash is received.

This approach ensures that income is matched to the period in which it was earned, which supports the accuracy of financial statements and compliance with accrual accounting.