Sale or Return Delays Revenue Recognition

Steps:

• Sale or return sends goods to customer for trial, allowing returns if unsold.
• No entry in sales journal means revenue not recorded until customer accepts or sells.
• This follows revenue recognition only upon realization of the sale.
• Realisation ensures income recorded when transaction completes, avoiding premature booking.

Why D is correct:

• Realisation concept requires revenue recognition only when ownership transfers and returns are unlikely, as here with possible returns.

Why the others are wrong:

• A: Going concern assumes business continuity, irrelevant to sale timing.
• B: Matching allocates expenses to revenue periods, not when sales are recorded.
• C: Materiality ignores insignificant items, but $200 recording hinges on sale status, not size.

Final answer: D