On October 31,Michael Corporation signed a one-year contract to provide services to Love Company for $80,000 throughout the next year.Love will pay for the services on November 1.Using the accrual basis of accounting,when should Michael Corporation recognize revenue?

Question

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Under the accrual basis of accounting, revenue should be recognized as it is earned, not when cash is received. Therefore, Michael Corporation should recognize revenue throughout the year as the services are provided, rather than waiting until all services are completed or until cash is received. Option (A) is incorrect because the timing of cash receipts is not used to determine when revenue is recognized. Option (B) is incorrect because it suggests waiting until all services are provided, which is not in line with the accrual basis of accounting. Option (D) is incorrect because it suggests recognizing revenue only at specific dates, which does not reflect when it is actually earned.

On October 31,Michael Corporation Signed a One-Year Contract to Provide