In September,a customer signed a contract to have his house painted and paid for the job in October.The painting company bought the paint in August on account and paid for it in September.The painting company painted the house in November.According to the revenue and matching principles,the painting company should record:
A)the revenues in November and the expenses in September.
B)the revenues and the expenses in September.
C)the revenues and the expenses in November.
D)the revenues in September and the expenses in August.

Question

Quizplus · Accepted Answer

According to the revenue recognition principle, revenue is recognized when the company has completed its obligations to the customer, which in this case is when the house was painted in November. Therefore, the revenue should be recorded in November. According to the matching principle, expenses should be matched with the revenues they helped generate. In this case, the expenses incurred for purchasing the paint should be matched with the revenue and recorded in November when the house was painted.

In September,a Customer Signed a Contract to Have His House