On December 15 of the current year,Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year.The client paid the entire $40,000 on the date the contract was signed.Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received?
A)Monetary unit assumption.
B)Going-concern assumption.
C)Measurement (Cost)principle.
D)Business entity assumption.
E)Revenue recognition principle.

Question

Quizplus · Accepted Answer

The revenue recognition principle requires that revenue is recognized in the accounting records when it is earned, regardless of when the cash is received. In this case, the bookkeeping services will be provided in the following year, so the revenue should be recorded in that year.

On December 15 of the Current Year,Conrad Accounting Services Signed