Master Revenue Recognition with IFRS 15 & ASC 606 Exam Questions and Answers

Master Revenue Recognition with IFRS 15 & ASC 606 certification exam assessment practice question and answer (Q&A) dump including multiple choice questions (MCQ) and objective type questions, with detail explanation and reference available free, helpful to pass the Master Revenue Recognition with IFRS 15 & ASC 606 exam and earn Master Revenue Recognition with IFRS 15 & ASC 606 certificate.

Question 1

Which of the following best defines revenue recognition?

A. Recording revenue when shareholders are paid dividends
B. Recording revenue when expenses are matched
C. Recording revenue when performance obligations are satisfied
D. Recording revenue when taxes are filed

Answer

C. Recording revenue when performance obligations are satisfied

Explanation

Recognition occurs when control transfers to the customer.

Question 2

Why is accrual accounting necessary for revenue recognition?

A. Because it automatically calculates profits
B. Because it records revenue when earned, regardless of cash received
C. Because it eliminates the need for financial statements
D. Because it only records cash inflows

Answer

B. Because it records revenue when earned, regardless of cash received

Explanation

Accrual ensures recognition aligns with performance.

Question 3

Which statement aligns with IFRS 15 and ASC 606?

A. Revenue is recognized only when auditors approve
B. Revenue is recognized when control of goods/services transfers to the customer
C. Revenue is recognized when invoices are issued
D. Revenue must always be recognized at contract signing

Answer

B. Revenue is recognized when control of goods/services transfers to the customer

Explanation

Recognition is based on control transfer.

Question 4

What is the main factor in deciding revenue timing?

A. Cash collection schedule
B. Transfer of control of goods/services to customer
C. End of financial year
D. Invoice date

Answer

B. Transfer of control of goods/services to customer

Explanation

Transfer of control is central to IFRS 15.

Question 5

How should advances from customers be treated?

A. As miscellaneous income
B. As immediate sales revenue
C. As liabilities (deferred revenue)
D. As tax deductions

Answer

C. As liabilities (deferred revenue)

Explanation

Advances create an obligation to deliver goods/services.

Question 6

Which scenario reflects premature revenue recognition?

A. Recording revenue when only a deposit is received
B. Recording revenue when control transfers
C. Recording revenue after delivery
D. Recording revenue when service is complete

Answer

A. Recording revenue when only a deposit is received

Explanation

Deposits are liabilities until performance is satisfied.

Question 7

In a layaway sale, revenue is recognized when:

A. The customer forfeits the deposit
B. The seller receives the first deposit
C. The customer signs a layaway agreement
D. The goods are delivered to the customer

Answer

D. The goods are delivered to the customer

Explanation

Delivery signifies transfer of control.

Question 8

In Example 4, RJ Limited could not recognize December sales because:

A. The invoice was missing
B. The customer delayed payment
C. The auditor restricted recognition
D. Ownership and control transferred only in January

Answer

D. Ownership and control transferred only in January

Explanation

Transfer of control in January delayed recognition.

Question 9

Goods in transit at year-end should be treated as:

A. Deferred revenue for the seller
B. Buyer’s inventory if control has passed
C. Seller’s revenue regardless of shipment
D. Always seller’s inventory

Answer

B. Buyer’s inventory if control has passed

Explanation

Goods in transit belong to buyer if control transferred.

Question 10

Which of the following is NOT a performance obligation under IFRS 15?

A. Providing after-sales support
B. Delivery of goods to a customer
C. Rendering contracted services
D. Collection of payment from a customer

Answer

D. Collection of payment from a customer

Explanation

Payment collection is not a performance obligation; it is a result of revenue recognition.

Question 11

Why is accrual accounting essential for revenue recognition?

A. Because it eliminates expense reporting
B. Because it records revenue only when cash is collected
C. Because it records revenue when earned, not when cash is received
D. Because it simplifies bookkeeping

Answer

C. Because it records revenue when earned, not when cash is received

Explanation

Accrual matches revenue to when performance occurs.

Question 12

Under IFRS 15, which of the following best defines “transfer of control”?

A. Customer gains the ability to direct use and obtain benefits of the goods/service
B. Seller issues an invoice
C. Customer signs the sales contract
D. Customer pays an advance deposit

Answer

A. Customer gains the ability to direct use and obtain benefits of the goods/service

Explanation

This is the definition of control transfer.

Question 13

How should customer advances be presented in financial statements?

A. As prepaid expenses
B. As deferred tax assets
C. As revenue in the income statement
D. As liabilities in the balance sheet

Answer

D. As liabilities in the balance sheet

Explanation

Advances represent obligations to deliver goods/services.

Question 14

What ensures revenue is recognized in the correct period?

A. Matching revenue to performance obligations in the reporting period
B. The tax reporting schedule
C. The entity’s cash flow position
D. Year-end adjustments by auditors

Answer

A. Matching revenue to performance obligations in the reporting period

Explanation

Recognition aligns with obligations performed.

Question 15

In a layaway sale, revenue is recognized when:

A. The contract is signed
B. The product is delivered to the customer
C. The customer pays the deposit
D. The customer forfeits the deposit

Answer

B. The product is delivered to the customer

Explanation

Control transfers at delivery.

Question 16

Why was RJ Limited required to record goods as inventory until January in Example 4?

A. Because ownership and risk had not transferred before delivery
B. Because auditors required delay
C. Because the customer delayed payment
D. Because the invoice was missing

Answer

A. Because ownership and risk had not transferred before delivery

Explanation

Recognition depends on transfer of risk and control.

Question 17

Which of the following is an example of premature revenue recognition?

A. Recognizing revenue when only an advance deposit is received
B. Recognizing revenue after all services are performed
C. Recognizing revenue after goods are shipped and delivered
D. Recognizing revenue upon satisfying performance obligations

Answer

A. Recognizing revenue when only an advance deposit is received

Explanation

Advances must be deferred as liabilities.

Question 18

Goods in transit should be recognized as the buyer’s inventory when:

A. The seller still retains control
B. Payment has been received in full
C. Goods are stored in seller’s warehouse
D. Control and risk have passed to the buyer, even if goods are in transit

Answer

D. Control and risk have passed to the buyer, even if goods are in transit

Explanation

Transfer of control defines ownership.

Question 19

Why is the revenue recognition principle critical for stakeholders?

A. It reduces the number of journal entries
B. It ensures accurate and comparable financial reporting
C. It determines dividend distribution
D. It calculates depreciation

Answer

B. It ensures accurate and comparable financial reporting

Explanation

Revenue recognition standardizes financial reporting.