Which accounting standard requires companies to recognize revenue when it is ear
Practice Questions
Q1
Which accounting standard requires companies to recognize revenue when it is earned?
GAAP
IFRS
Both GAAP and IFRS
Neither GAAP nor IFRS
Questions & Step-by-Step Solutions
Which accounting standard requires companies to recognize revenue when it is earned?
Step 1: Understand what revenue recognition means. It is the process of recording revenue in the financial statements when it is earned.
Step 2: Learn about GAAP, which stands for Generally Accepted Accounting Principles. It is a set of rules used in the United States.
Step 3: Learn about IFRS, which stands for International Financial Reporting Standards. It is a set of rules used in many other countries around the world.
Step 4: Recognize that both GAAP and IFRS have similar rules regarding revenue recognition.
Step 5: Conclude that both GAAP and IFRS require companies to recognize revenue when it is earned, not when cash is received.
