When does the revenue cycle management process typically begin in financial accounting?

• A. When a customer places an order for goods or services
• B. When payment is received from the customer
• C. When the company prepares its financial statements
• D. When the goods are delivered to the customer

Answer: (A)

Verified step by step guidance

1. Understand the concept of the revenue cycle in financial accounting. The revenue cycle refers to the process of recognizing and managing revenue from the point of customer interaction to the final payment and recording in financial statements.
2. Identify the key stages of the revenue cycle: (1) customer places an order, (2) goods or services are delivered, (3) payment is received, and (4) revenue is recorded in financial statements.
3. Analyze the options provided in the question. The revenue cycle management process typically begins when a customer places an order for goods or services, as this is the initial interaction that triggers the cycle.
4. Clarify why the other options are not correct: (a) Payment received is a later stage in the cycle, (b) Preparing financial statements is the final stage, and (c) Delivery of goods is an intermediate step but not the starting point.
5. Conclude that the correct answer is the first option: 'When a customer places an order for goods or services,' as this marks the beginning of the revenue cycle management process.