CFA Practice Question

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CFA Practice Question

The generally accepted accounting principle that determines when revenue should be recorded in the accounting records is called ______.

A. the matching principle
B. the realization principle
C. the time period principle
D. accrual basis of accounting
E. double-entry accounting
Correct Answer: B

User Contributed Comments 10

User Comment
frenchfurt i'm not agree with this answer. "when revenue should be recorded" :refers to revenue recognition. why it is not the principe of realization" ? los b
Matching rule : "let the expenses follow the revenues". what do you think about it?
brimann The general rule for revenue recognition includes the concept of realizability: Revenue, measured as the amount expected to be collected, can be recognized when goods or services have been provided and their cost can be reliably determined.
bobert Is it not D just because it isn't a principle, but rather a method of accounting?
RCapistrano Matching principle pertains to matching the cost generated by the products sold (which generated revenue) for a given period.

The issue,"...when revenue should be recorded in the accounting records.." is solved by applying the revenue recognition criteria and B is one of them.
bundy Its in the book Reading 32 General Priciples
vatsa I don't agree answer is B. General principle for revenue recognition is Accrual accounting, recognize revenue when it occurs.
munro everything in accounting is on accrual basis. for revenue recognisation, it's the realization principle: the revenue needs to be realized before being recorded in the books.
abhinavkapoor GAAP Principle states:

Revenue should be recorded as soon as it is realized.
Trofimenko is it from sfac 5?
Bhidhi Revenue is generally recognised when it is:
1. realized or realizable, &
2. earned
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