On December 15, 2010, a company receives an order from a customer for services to be performed on December 28, 2010. Due to a backlog of orders, the company does not perform the services until January 3, 2011. The customer pays for the services on January 6, 2011. The matching principle requires the revenue to be recorded by the company on:

Question

Quizplus · Accepted Answer

The revenue should be recognized when the services are performed, which in this case was on January 3, 2011. This is in accordance with the accrual basis of accounting. While the order was received on December 15, 2010, no services were performed until January 3, 2011, so recognizing revenue on that date would not be accurate. Likewise, the customer paying on January 6, 2011, does not determine the date of revenue recognition. The fact that the services were not performed until January 3, 2011, is the determining factor for when revenue should be recognized.

On December 15, 2010, a Company Receives an Order from a Customer