(L.O. 7) Revenue is to be recognized when the related performance obligation is satisfied. This statement refers to the:

a. revenue recognition principle.

b. matching principle.

c. going concern assumption.

d. consistency quality.

Approach and Explanation: Briefly define each of the answer selections. Choose the item for which your definition most closely agrees with the stem of the question. See Illustration 2-4 and 2-2. The revenue recognition principle dictates that revenue be recognized (recorded and reported) in the period the related performance obligation is satisfied. The matching principle (or expense recognition principle)

dictates that expenses be recognized in the same period as the revenue which they helped to generate is recognized. The going concern assumption implies that an enterprise will continue in business indefinitely. The consistency (a type of comparability) quality or characteristic dictates that for financial information to be useful, an entity is to apply the same accounting methods to similar events for successive accounting periods. (Solution = a.)