For a business selling magazine subscriptions and preparing financial reports on a monthly basis,when should it recognise the revenue from the sale of annual subscriptions?
A) When a customer pays the annual subscription.
B) Monthly, on a straight-line basis over the 12 month subscription period.
C) Evenly, from the month of payment up to the end of the current financial year.
D) When the annual subscription period expires.

Question

Quizplus · Accepted Answer

Revenue recognition for annual subscriptions should be done on a straight-line basis over the subscription period, meaning that the revenue is recognized equally each month over the 12-month period. This is because the service provided (the magazine subscription) is spread over the entire year, and recognizing all revenue at once would not accurately reflect the timing of the service provided. Therefore, option B is the best choice.

For a Business Selling Magazine Subscriptions and Preparing Financial Reports