Revenues are reported when:

• A. An invoice is prepared, regardless of delivery or payment.
• B. Cash is received, regardless of when the goods or services are delivered.
• C. They are earned and realizable, regardless of when cash is received.
• D. Expenses related to the revenue are paid.

Answer: (C)

Verified step by step guidance

1. Understand the concept of revenue recognition: Revenue is recognized when it is earned and realizable, meaning the company has delivered goods or services and there is a reasonable expectation of payment.
2. Review the accrual basis of accounting: Under this method, revenues are recorded when earned, not necessarily when cash is received. This aligns with the matching principle, which ensures that revenues and related expenses are recorded in the same period.
3. Analyze the incorrect options: For example, recognizing revenue when an invoice is prepared or when cash is received does not align with the accrual basis of accounting unless the goods or services have been delivered.
4. Focus on the correct principle: Revenue is recognized when it is earned (goods or services are delivered) and realizable (payment is reasonably assured), regardless of the timing of cash receipt.
5. Relate this to the matching principle: Expenses related to the revenue should be recorded in the same period as the revenue, ensuring accurate financial reporting and compliance with accounting standards.