Question

When summer school classes at a university cover parts of two fiscal years, the revenues and expenses are

A) All recognized in the second of the two years.
B) Apportioned to the two fiscal years.
C) Recognized in the year in which the term was predominantly conducted.
D) All recognized in the first of the two years.

Answer 1

Summer school classes at a university that span two fiscal years should have their revenues and expenses apportioned to both fiscal years, aligning with the period of the academic services provided.

Step-by-step explanation:

When summer school classes at a university cover parts of two fiscal years, the revenues and expenses are apportioned to the two fiscal years. This is because revenue recognition should match the period in which the related services were performed, which in this case would be during the academic term spanning over two fiscal periods. Similarly, expenses related to these classes should also be recognized in the fiscal years they are incurred. This accounting practice ensures that each fiscal year reflects the economic activity that occurred during that period, providing a clearer picture of the institution's financial performance.