Fang's Tune-Up Shop Ltd.uses the accrual basis of accounting.Fang services a car on May 31.The customer picks up the vehicle on June 1 and mails payment to Fang on June 5.Fang receives the cheque in the mail on June 6.When would Fang recognize the revenue as being earned?
A)June 6
B)June 5
C)June 1
D)May 31

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue is recognized when it is earned, regardless of when payment is received. Since Fang serviced the car on May 31, the revenue is recognized on that date.