Question

In the Month of March, Baldwin received orders of 113 units at a price of $15.00 for their product Bell. Baldwin uses the accrual method of accounting and offers 30 day credit terms. Baldwin delivers 113 units in April. They received payment for 57 units in March, and 57 units in April. In the March income statement, how much revenue is recognized on the March income statement from this order?

Answer 1

Zero

Step-by-step explanation:

Under the accrual method, revenue is recognized once the recognition criteria is met. These includes;

• the goods have been delivered or the service rendered
• the affiliated cost for such revenue can be reliably measured

When revenue is earned but cash is yet to be received,

Debit Accounts receivable

Credit Revenue account

When cash is received,

Debit Cash account

Credit Accounts receivable.

Since the items were delivered in April, any amount received as revenue in March will be deferred. As such, no revenue will be recognized in the income statement for March.