Question

During December, Mainzel Interior Design Corporation redecorated the reception areas of a local hotel. The project was completed on December 31 with payment due in 30 days. Payment was received on January 21 of the following year. When should Mainzel recognize the related revenue using accrual accounting?

Answer 1

Answer:

On December 31, related revenue should be recognized

Explanation:

According to the accrual basis of accounting, the recording of the transactions is done when expenses are incurred, and services are rendered to the customers in return the revenues are earned.

It matches the revenues and expenses to a particular year based on weekly, monthly or yearly

In the given case, the projected was completed on December 31 but the payment was received on January 21. So, the revenue should be recognized when the project was completed i.e December 31.