HELP ME WITH THIS...


Revenue should be included in the income statement in the period in which

a. it is collected.
b. it is earned.
c. the related expense is paid.
d. total revenues first exceed total expenses for a given transaction.
e. it is subject to tax.

Expense should be included in the income statement in the period in which (hint: the matching principle applies here)

a. it is paid.
b. the related revenue is collected.
c. the related revenue is subject to tax.
d. the related revenue is earned.
e. it is deductible for tax purposes.

Quote:

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Originally Posted by tvlaptop

HELP ME WITH THIS....


Revenue should be included in the income statement in the period in which

a. it is collected.
b. it is earned.
c. the related expense is paid.
d. total revenues first exceed total expenses for a given transaction.
e. it is subject to tax.

Expense should be included in the income statement in the period in which (hint: the matching principle applies here)

a. it is paid.
b. the related revenue is collected.
c. the related revenue is subject to tax.
d. the related revenue is earned.
e. it is deductible for tax purposes.

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The answer to your two questions is b and d.

Here is why I answered this way...

The only time you should recognize revenue is when the 4 criteria of the revenue principle are met.
1. Delivery has occurred & services rendered.
2. Persuasive evidence of an arrangement for customer payment.
3. Price is fixed and determinable.
4. Collection is reasonably assured.

The matching principle requires that expenses be recorded when incurred in earning revenue. (i.e. Cost incurred to generate revenue be recognized in the same period.)

I just agreed with you on another post Kygall, so unfortunately can't do it again just yet.

But I do agree with you. The answers are b and d.