Under the revenue recognition principle, which of the following is NOT a condition for recognizing revenue?

• A. The price is fixed or determinable
• B. Collection is reasonably assured
• C. There is persuasive evidence of an arrangement for payment
• D. The customer order is placed

Answer: (D)

Revenue recognition hinges on having a valid arrangement, a determinable price, collectability being reasonably assured, and the seller’s performance (delivery or services rendered). The requirement that a customer order be placed is not needed to recognize revenue. A binding contract or persuasive arrangement can exist without a formal customer order, and revenue can be recognized when the seller has delivered or performed and the price is determinable with collectability reasonably assured. In short, a customer order by itself does not prove a contract or indicate that performance has occurred, so it is not a condition for recognizing revenue.