Question

Safe Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Safe Home has collected $3,090 from cash-paying customers. Safe Home’s remaining customers owe the business $540. Safe Home recorded $3,090 of service revenue for the year.

If Safe Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year?

Answer 1

Here Safe homes have recognized revenue on a cash basis. That is revenue is recognized as and when

cash is collected from the customers.Service revenue would have been different if Safe homes use

the accrual concept of accounting for the recognition of revenue.Accrual concept recognize revenue &

expenses as and when earned or expended irrespective of whether cash is received or paid.

So revenue to be recognized under acrual concept     =    $3090 + $540

= $3630