Question

A company received an order from a customer in June for services to be provided. Those services were provided in July, and the customer paid the full amount in August. According to the revenue recognition principle, in which month should the company record revenue?

Answer 1

July month

Step-by-step explanation:

According to the revenue recognition principle, the transaction should be recorded when the services are performed not when the cash is received from the customer. It is a reverse of the cash basis of accounting that means it follows the accrual basis of accounting.

In the given question, the service is provided in the month of July and the customer paid the full amount in August.

So, according to this principle, the revenue should be recorded in the July month