Question

A company billed a client for services performed on January 10. The customer paid one-half of the amount owed on January 20 and the other one-half on February 24. When should the company record the related Service Revenue?

Answer 1

Answer:

January 10

Explanation:

According to the revenue recognition principle of accrual accounting, revenue must be recognized when the earning process is completed. In this case, the earning process was completed on January 10 when the services were performed. The related cash inflows are not relevant at the time of considering service revenue.  

the journal entries should be:

January 10, 202x

Dr Accounts receivable XY

    Cr Service revenue XY

January 20, 202x

Dr Cash 0.5XY

    Cr Accounts receivable 0.5XY

February 24, 202x

Dr Cash 0.5XY

    Cr Accounts receivable 0.5XY