On December 31, 2019, a company signed a one-year contract to provide services to a particular customer for $12,000. The customer will pay for the services during January 2020. Using the accrual basis of accounting, when should the company recognize revenue?

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Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue should be recognized when it is earned, regardless of when cash is received. In this case, the company signed a contract to provide services, indicating that the revenue will be earned over the course of the year. Therefore, the revenue should be recognized equally throughout 2020 as the services are provided.

On December 31, 2019, a Company Signed a One-Year Contract