Orange County Shop follows the revenue recognition principle. Orange County services a bicycle on July 31. The customer picks up the bike on August 1 and mails the payment to Orange County on August 5. Orange County receives the check in the mail on August 6. When should Orange County show that the revenue was recognized?
A) July 31
B) August 1
C) August 5
D) August 6

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue should be recognized when the service is provided, which in this case was on July 31 when the bicycle was serviced. The timing of payment or receipt of payment does not affect when revenue is recognized.

Orange County Shop Follows the Revenue Recognition Principle