Which statement reflects accrual accounting revenue recognition?

• A. Revenue is recognized when services are provided.
• B. Revenue is recognized only when cash is received.
• C. Revenue is recognized when the contract is signed.
• D. Revenue is recognized when expenses are incurred.

Answer: (A)

Under accrual accounting, revenue is recognized when it is earned—when the service has been performed or the goods delivered—not when cash is received. In healthcare, this means recording revenue (and typically an accounts receivable) at the time a patient encounter occurs and the provider has fulfilled the service, even if payment from insurer or patient arrives later. This timing matches revenue with the period in which the service was provided and reflects the economic event, which is the essence of accrual revenue recognition. Recognizing revenue only when cash is received is cash-basis accounting, which does not reflect when services were actually performed. Recognizing revenue at contract signing would occur before any service is rendered. Recognizing revenue when expenses are incurred confuses revenue with expenses, which are recorded separately to reflect cost in the period incurred.