On December 15, 2019, a company receives an order from a customer for services to be performed on December 28, 2019. Due to a backlog of orders, the company does not perform the services until January 3, 2020. The customer pays for the services on January 6, 2020. When should revenue be recorded by the company?

Question

Quizplus · Accepted Answer

Revenue should be recorded when the service is performed, which occurred on January 3, 2020. Even though the order was received on December 15, 2019, the company did not perform the service until January 3, 2020, which is when revenue should be recognized according to the matching principle. The date the customer paid does not necessarily indicate the appropriate recognition of revenue.

On December 15, 2019, a Company Receives an Order from a Customer