Revenue is traditionally recognized in the accounting records when
A. cash is received.
B. services are rendered.
C. it’s incurred.
D. None of the above
The correct answer is B. Services are rendered.
Revenue is traditionally recognized in the accounting records when services are rendered. This principle of revenue recognition is based on the concept of matching revenues with expenses. When a company provides a service to customers, it typically generates revenue. The revenue is recognized in the accounting records at the point when the service is performed or completed, regardless of when the cash is actually received.
To get this answer, one can refer to the generally accepted accounting principles (GAAP) or accounting standards that govern revenue recognition. These principles ensure that companies record revenue in a consistent and reliable manner. By understanding the basic principles of revenue recognition, one can determine the appropriate accounting treatment for recognizing revenue in different situations.