Final answer:
In accrual basis accounting, revenue should be recorded when services are provided or goods are delivered, not when the cash is received. This method follows the revenue recognition principle, representing the company's financial activity more accurately by matching revenue and expenses to the periods in which they occur.
Step-by-step explanation:
If a company is using accrual basis accounting, it should record revenue when the services are provided or goods are delivered, regardless of when the cash is received. This means that revenue is recognized when it is earned and realizable, following the revenue recognition principle. This method contrasts with cash basis accounting, where revenue is recorded only when cash is received, and expenses are recorded only when cash is paid out.
Therefore, under the accrual basis, even if payment is received at a later date, the company would still record the revenue as long as the service has been performed or the product has been delivered. This approach to accounting helps provide a more accurate picture of a company's financial health, as it matches revenues to the periods in which they are actually earned and expenses are incurred to generate those revenues.