Generally Accepted Accounting Principles, as they relate to the Income Statement includes the recognition principle: to recognize revenue when the earnings process is virtually complete and the value of an exchange of goods or services is known or can be reliably determined. Which of the following statements is true with regard to this principle?

Multiple Choice

• Revenues must be reported only when cash is collected

• Revenue is recognized at the time of sale. Costs associated with the sale of that product likewise would be recognized at that time

• Expenses can be smoothed to make earnings appear greater

• Income and expense items can be recorded at any time the company deems appropriate