CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

I. The generally accepted accounting principle (GAAP) that determines when revenue should be recorded in the accounting records is called the realization principle.
II. The generally accepted accounting principle (GAAP) that determines when expenses should be recorded in the accounting records is called the realization principle.

A. Both statements are true.
B. Only statement I is true.
C. Both statements are false.
Explanation: I. The realization principle determines when revenue should be recorded in the accounting records. Revenue is realized when services are rendered to customers or when goods sold are delivered to customers.
II. The matching principle is the generally accepted accounting principle that determines when expenses should be recorded in the accounting records. The revenue earned during an accounting period is matched (offset) with the expenses incurred in generating this revenue.

User Contributed Comments 4

User Comment
Pooh The realization principle refers to when revenue is realized; the matching principle refers to when expenses are matched with revenue earned.
murli Realization principle = revenue has to be recognized on completion of earngins process and realization.
achu good question. Yes, I got it wrong.
copus me too....good thing I never became a bean counter!
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