A college student registers for classes and pays tuition with a credit card. As the college uses accrualbasis accounting, it will recognize the payment as revenue after it receives the cash in its bank account.

Question

A college student registers for classes and pays tuition with a credit card. As the college uses accrual­basis accounting, it will recognize the payment as revenue after it receives the cash in its bank account.

Quizplus · Accepted Answer

Under accrual-basis accounting, revenue is recognized when it is earned, not when cash is received. In this case, the revenue is earned when the student registers for classes, not when the payment is received. The payment would be recorded as a liability until the revenue is earned.

A College Student Registers for Classes and Pays Tuition with a Credit