What is the core principle of revenue recognition under the accrual basis of accounting?
a) Revenue is recognized when cash is received
b) Revenue is recognized when the product is sold or the service is rendered
c) Revenue is recognized when the customer places an order
d) Revenue is recognized when a purchase order is received
According to the revenue recognition principle, when should revenue be recognized?
a) When the agreement is signed
b) When payment is received
c) When the performance obligation is satisfied
d) When the product is shipped
Which of the following is required under the IFRS 15 revenue recognition model?
a) Identifying the contract with the customer
b) Recognizing revenue only when cash is received
c) Recognizing revenue on the date of shipping
d) Recognizing revenue only when the invoice is sent
Which of the following events triggers the recognition of revenue under the percentage-of-completion method?
a) Completion of the project
b) Receipt of payment
c) Performance of work as the project progresses
d) Delivery of the finished product
When should revenue be recognized under the completed contract method?
a) After project milestones are met
b) At the end of the contract
c) When cash payments are received
d) When the product is delivered
Under IFRS 15, what is required before revenue can be recognized from a contract?
a) An agreement with a customer
b) A signed purchase order
c) Confirmation of payment
d) Confirmation of the delivery date
Which of the following is a key concept in the revenue recognition principle?
a) The performance obligation must be satisfied before revenue is recognized
b) Revenue must be recognized immediately after a sale is made
c) Revenue is recognized only when a product is paid for
d) Revenue is recognized after the customer requests the product
When should revenue be recognized for a subscription-based service?
a) When the customer subscribes
b) At the end of the subscription period
c) As the service is provided over time
d) When the subscription is paid in full
What is the first step in the revenue recognition process under IFRS 15?
a) Recognizing revenue based on milestones achieved
b) Identifying the performance obligations in the contract
c) Sending an invoice to the customer
d) Completing the performance obligation
What is the key factor in determining when to recognize revenue for long-term construction contracts?
a) When the customer approves the work
b) When the contract is signed
c) When significant progress has been made on the contract
d) When the final invoice is paid
Under IFRS 15, what does “control” refer to in terms of revenue recognition?
a) The seller must have the right to receive payment from the customer
b) The customer must have the ability to dictate the use of the good or service
c) The seller must have physical possession of the good
d) The customer must take delivery of the goods
Under the revenue recognition principle, how is revenue recognized for a service that is rendered over time?
a) Only when the service is completed
b) As the service is performed
c) After the client makes a payment
d) When the service agreement is signed
Which of the following best describes the matching principle in revenue recognition?
a) Recognizing revenue when the sale is complete and expenses when the payment is made
b) Recognizing revenue and expenses in the same accounting period
c) Recognizing revenue at the time the contract is signed
d) Matching revenue with the date of customer payment
What is the “transaction price” in revenue recognition?
a) The price set by the seller for the good or service
b) The total revenue recognized from the sale
c) The amount the customer has agreed to pay for the goods or services
d) The amount of profit the seller expects to earn from the sale
Which of the following revenue recognition methods would be most appropriate for a long-term project with uncertain completion?
a) Completed contract method
b) Percentage-of-completion method
c) Revenue from cash received
d) Direct payment method
Which of the following events would lead to revenue recognition under the “earned” condition?
a) Completion of the sale transaction
b) Transfer of goods to the customer
c) Payment by the customer
d) Delivery of the product to the customer’s location
Under the “performance obligation” model of revenue recognition, what is required before revenue can be recognized?
a) The customer must pay in full
b) The product must be shipped
c) The performance obligation must be fulfilled
d) The payment terms must be agreed upon
Under the percentage-of-completion method, how is revenue typically recognized?
a) Based on the actual completion percentage of the contract
b) Based on the total contract value
c) When the contract is completed
d) When the customer makes a payment
What is the impact of early revenue recognition on financial statements?
a) It increases liabilities
b) It overstates revenues and assets
c) It reduces the recognition of expenses
d) It defers the recognition of expenses
Which of the following is the most important consideration for recognizing revenue under the percentage-of-completion method?
a) The date the customer places an order
b) The completion of the project
c) The proportion of work completed relative to total contract cost
d) The amount billed to the customer
How is revenue recognized when goods are sold with a right of return?
a) Revenue is recognized at the time of sale, without regard to the return policy
b) Revenue is recognized when the goods are returned
c) Revenue is recognized only when the right of return expires
d) Revenue is recognized only when it is probable that the goods will not be returned
Which of the following is a factor in determining the timing of revenue recognition?
a) The delivery of goods to the customer
b) The customer’s payment terms
c) The customer’s acceptance of the product
d) All of the above
What is a “performance obligation” in the context of revenue recognition?
a) An agreement to deliver goods or services in the future
b) A promise made by the customer to pay for a product
c) A right to use the product after it is delivered
d) A guarantee to refund the payment
Under the revenue recognition principle, when should revenue be recognized if the payment is contingent on future events?
a) When the payment is received
b) When it is probable that the contingency will be resolved
c) When the payment is due
d) When the contract is signed
Which of the following is an example of revenue recognition for long-term contracts?
a) Using the completed contract method
b) Recognizing revenue immediately after each milestone payment
c) Recognizing revenue only when cash is received
d) Recognizing revenue when the customer takes delivery of the goods
Which of the following should be recognized as revenue when goods are shipped on consignment?
a) When the goods are delivered to the consignee
b) When the consignee sells the goods to a third party
c) When the consignor receives a commission
d) When the customer confirms receipt of the goods
