15.3.8 - Realization Concept (Revenue Recognition)
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Practice Questions
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Define the realization concept.
💡 Hint: Think about when a company completes its service or sale.
True or False: Revenue is recorded when cash is received.
💡 Hint: Recall the key principle of recognizing revenue when it is earned.
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Interactive Quizzes
Quick quizzes to reinforce your learning
When is revenue recognized according to the realization concept?
💡 Hint: Think about when you actually earn your income.
True or False: The realization concept allows for recognizing revenue on a cash basis.
💡 Hint: Remember the key principle of earning revenue.
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Challenge Problems
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A software company signs a contract in December to provide services for the upcoming year. The first payment is received in January. Discuss when revenue should be recognized and why.
💡 Hint: Consider the timing of service delivery vs. payment.
Company X sells $10,000 worth of merchandise in December on credit. They don’t collect the payment until February. Analyze how this affects their December income statement and cash flow statement.
💡 Hint: Think about how accounts receivable works and its implications on financial reporting.
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