Tony's Tune-Up Shop Ltd. follows the revenue recognition principle. Tony services a car on May 31. The customer picks up the vehicle on June 1 and mails the payment to Tony on June 5. Tony receives the cheque in the mail on June 6. When should Tony show that the revenue was earned?
A) June 5
B) May 31
C) June 1
D) June 6

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue is recognized when it is earned and realizable, regardless of when payment is received. In this case, the service was completed on May 31, so the revenue should be recognized on that date.