On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received?
A) Going-concern assumption.
B) Monetary unit assumption.
C) Measurement (Cost) principle.
D) Business entity assumption.
E) Revenue recognition principle.

Question

Quizplus · Accepted Answer

The revenue recognition principle directs companies to recognize revenue in the accounting period in which it is earned, regardless of when it is received. In this case, Conrad Accounting Services signed a contract to provide bookkeeping services in the following year, so the revenue should be recognized in that year, when the services are actually provided, rather than in the current year when the cash was received.

On December 15 of the Current Year, Conrad Accounting Services