Recognizing Profit When Cash Collection is in Doubt | CFA Level 1 Exam Prep

Acceptable Method for Recognizing Profit When Cash Collection is in Doubt

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Question

An acceptable method for recognizing profit when the collection of cash is in doubt is the ________.

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A

Revenue is recognized when the conditions of "realized" or "realizable" and earned are met. If the collectibility of assets to be received for products or services is in doubt, revenues may be recognized when cash is received, as in the installment method.