Question

Joss Distributors had the following revenue-related transaction during December: Collected cash for services provided in November, $12,000 Provided services on account, $24,500, of which Joss collected $14,000 Received $2,000 on December 1 for services to be provided evenly in December and January. According to the revenue recognition principle, how much revenue should Joss record for December?

Answer 1

Answer:

The revenue for the month of December would be $25,500.

Explanation:

As per the revenue recognition principle, the revenue is recorded as and when the services are rendered or goods are delivered to the customer.

Cash collected for services provided in November: This won't be recorded as revenue in December as the services were rendered in the month of November. Therefore, it belongs to the month of November and not December.

Provided services on account $24,500 (collected $14,000 only): This would be considered as the revenue earned in the month of December.

Received $2,000 on December 1 and services provided evenly in December and January: The services will be provided evenly in both the months. So, the amount will be recorded as service revenue evenly in both the months. Thus, $1,000 would be recorded as revenue for December and remaining $1,00 as revenue for January.

Therefore, the revenue for December would be = $24,500 + $1,000 = $25,500.