Glass Corporation sold merchandise to a customer for $30,000 on credit on July 15. The customer paid Glass the amount due on July 31. Under the accrual basis of accounting, how should Glass record the transaction?

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue is recognized when earned, regardless of when cash is received. Therefore, the revenue should be recognized on July 15, the date of the sale. The subsequent cash receipt on July 31 has no effect on the recognition of the revenue. Total assets would have increased on July 15 as accounts receivable would have been recorded, and then decreased on July 31 when the accounts receivable was converted to cash.

Glass Corporation Sold Merchandise to a Customer for $30,000 on Credit