Revenue is recognized upon completion of the sale or when services have been performed and the business obtains the right to collect the sale price. This means that businesses cannot simply record revenues when they have received cash; rather, they must ensure that the earning process is complete and there is a reasonable expectation that they will receive payment.
Option b suggests that revenue recognition occurs only if a transaction creates an account receivable, which is not entirely accurate. While an account receivable is a common indicator of revenue recognition, it is not the sole determining factor. Revenue should be recognized when the delivery of goods and services has occurred, irrespective of payment timing.
Option c states that revenue recognition is determined only at the end of the accounting period, but this does not capture the essence of the revenue recognition principle. Companies may recognize revenues before the end of the period, as long as the aforementioned conditions are met.
In summary, proper revenue recognition hinges on the completion of the sale or service and the right to collect the payment, emphasizing the importance of the realization process in accounting.