Question

Question 1

On December 15, 2015, a public company receives an order from a customer for services to be performed on December 28, 2015. Due to a backlog of orders, the company does not perform the services until January 3, 2016. The customer pays for the services on January 6, 2016. When should revenue be recorded for the company? Why (support your argument with a principle from the textbook)?

Answer 1

Based on the principal in the text book, three classifications must be satisfied to be able to identify income.

1. Control and paybacks of the goods have been shifted to the client, or the service has been delivered to the customer (occurred January 3, 2016)

2. The amount of income can be dependably measured (order received on Dec 15, 2015)

3. It is possible that the business will get the financial advantage connected with the deal, which typically come in the form of cash receipt (payment was received on January 6, 2016), 2016 then one can say that income is acknowledged on Jan 6, 2016

With all three measures satisfied by January 6 the revenue can then be recorded.