Ron's Hot Rod Shop follows the revenue recognition principle. Ron services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Ron on August 5. Ron receives the check in the mail on August 6. When should Ron show that the revenue was earned?
A) July 31
B) August 1
C) August 5
D) August 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 July 31, so the revenue should be recognized on that date.

Ron's Hot Rod Shop Follows the Revenue Recognition Principle