Using accrual accounting, revenues are recorded when they are:

• A. Approved by management for recording at the end of the accounting period
• B. Invoiced, regardless of whether the goods or services have been provided
• C. Earned, regardless of when cash is received
• D. Collected in cash, regardless of when the revenue is earned

Answer: (C)

Verified step by step guidance

1. Understand the core principle of accrual accounting, which states that revenues should be recognized when they are earned, not necessarily when cash is received.
2. Recall that 'earned' means the company has delivered goods or performed services, fulfilling its obligations to the customer.
3. Recognize that revenue recognition is independent of cash collection; cash may be received before or after the revenue is earned.
4. Eliminate options that focus on cash collection or management approval, as these do not align with the accrual basis of accounting.
5. Conclude that under accrual accounting, revenues are recorded when they are earned, regardless of the timing of cash receipt.