An individual who recently founded a company that produces baseball bats and bails wants to determine their policy for revenue recognition. According to the revenue recognition principle, the most appropriate time to recognize revenue would be when

Answer (A) is correct.
REQUIRED: The most appropriate time to recognize revenue.
DISCUSSION: Revenues are normally recognized when they are realized or realizable and earned. Revenues are realized (or realizable) when goods or services have been exchanged for cash or claims to cash (assets readily convertible to cash). Revenues are earned when the earning process is substantially complete, and the entity is entitled to the resulting benefits or revenues. The revenue recognition criteria are ordinarily met at the point of sale (time of delivery of goods or services).
Answer (B) is incorrect. Under the accrual basis of accounting, revenue is not necessarily recognized when cash is received. Answer (C) is incorrect. The criteria for revenue recognition ordinarily have not been met until the product is sold. Answer (D) is incorrect. Under the accrual basis of accounting,
revenues are normally recognized when they are realized or realizable and earned, regardless of when the financial statements are prepared.