Beth operates a plumbing firm. In August of last year, she signed a contract to provide plumbing services for a renovation. Beth began the work that August and finished the work in December of last year. However, Beth didn't bill the client until January of this year and she didn't receive the payment until March when she received payment in full. When should Beth recognize income under the accrual method of accounting?
A)In August of last year
B)In December of last year
C)In January of this year
D)In March of this year
E)In April of this year

Question

Quizplus · Accepted Answer

Under the accrual method of accounting, income is recognized when it is earned, regardless of when payment is received. Since Beth completed the work in December of last year, she should recognize the income in December of that year.

Beth Operates a Plumbing Firm