Laine Services, a calendar year taxpayer, billed a client for $8,450 of services on November 30, 2016, and received a check in full payment from the client on January 12, 2017. If Poole is an accrual basis taxpayer, it reports $8,450 taxable income in 2016.

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, income is recognized when earned, not when received. Since the services were billed in 2016, the income is recognized in 2016.

Laine Services, a Calendar Year Taxpayer, Billed a Client for $8,450