When can revenue be recognized?

Revenue can be recognized once it has been earned, which aligns with the revenue recognition principle in accounting. This principle states that revenue should be recognized when it is realized or realizable and earned, regardless of when cash is received. In practical terms, this often means that revenue is recognized when goods or services have been delivered or performed, and there is a clear right to payment.

For instance, if a company delivers a product or completes a service, it is at this point that it has fulfilled its part of the agreement with the customer, which is the basis for recognizing revenue. This approach provides a more accurate reflection of a company's financial performance during a specific period, as it matches revenues with the expenses incurred to generate those revenues.

The other choices do not align with the revenue recognition principle. Recognizing revenue solely at the time of receipt would not provide a true picture of income earned, as the receipt of cash may not correspond with when the service was provided or the product was delivered. Recognizing revenue when goods are shipped can sometimes be appropriate, but it may not always reflect the completion of the earning process. Limiting recognition to only year-end would lead to a misrepresentation of revenues for the periods leading up to year-end, causing distortions in financial