Question

The 'Revenue Recognition' principle refers to ________.

• A. The process of matching of expenses and revenue
• B. The process of identifying those transactions that result in an inflow of cash from customers
• C. The earning process which gives rise to revenue realization
• D. The process of determination of the income of enterprise.

Answer 1

The correct option is A The process of matching of expenses and revenue

Revenue Recognition principle is based on accounting period concept. It assumes that all transactions relating to income and expenses must be recorded in the books of account based on the accounting period followed by the business. Hence if any amount which is not paid but the service is already taken must be recorded as an adjustment.