A company has a performance obligation when it agrees to
A) perform a service for a customer and receives cash payment.
B) sell a product to a customer after receiving payment.
C) perform a service or sell a product to a customer.
D) None of the answer choices are correct.

Question

Quizplus · Accepted Answer

A company has a performance obligation when it agrees to perform a service or sell a product to a customer. The company has committed to providing something of value to the customer in exchange for payment, so it is obligated to deliver on that promise. Option A and B are incorrect as they only cover one aspect of a performance obligation, either selling a product or providing a service, but not both. Option D is incorrect as all of the other answer choices relate to performance obligations.

A Company Has a Performance Obligation When It Agrees to