Understanding Revenue Recognition in Accounting

When is revenue generally recognized?

a. when cash is received

b. when the warranty expires

c. when production is completed

d. when sale occurs

Final answer:

Revenue is generally recognized at the time of the sale, according to the revenue recognition principle in accounting. This occurs when both parties agree to the terms and the product or service is delivered. So the answer is (d) when a sale occurs.

Explanation:

Revenue is generally recognized at the time of the sale. This is based on the revenue recognition principle in accounting. This principle states that revenue is recognized when it is earned and realizable.

This typically occurs during a sale, where both buyer and seller have agreed on terms and the service or product has been delivered. This does not necessarily mean when cash is received, as transactions can occur on credit.

Therefore, the correct answer to the question is d: when a sale occurs.