Question

Air France collected cash on February 4 from the sale of a ticket to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue?

Answer 1

Answer:

Air France should have recognized the Revenue in month of  APRIL.

Explanation:

According to the revenue recognition concept the revenue should be recognized when it is realizable. When goods or services are tranferred or rendered to the customer. It doesn't matter matter when the payment is received. Payment received in advance should be recorded as unearned revenue rather as revenue. On the other hand payment doesn't received until the transfer of goods or services, a receivable will be made in result of revenue recognition entry. Air France should recognize the revenue on April 5, when the flight took placed and services are performed. Sale of ticked on January 26 will be recorded as unearned revenue and a receivable on the other hand. The receivable will be adjusted on February 4 when cash is received and the revenue will be recognized on April 5 when flight took place.