Tony's Tune-Up Shop Ltd. follows the revenue recognition principle. Tony services a car on May 31. The customer picks up the vehicle on June 1 and mails the payment to Tony on June 5. Tony receives the cheque in the mail on June 6. When should Tony show that the revenue was earned?
A) May 31
B) June 5
C) June 1
D) June 6

Question

Quizplus · Accepted Answer

The revenue recognition principle dictates that revenue is recognized when it is earned, regardless of when payment is received. Since Tony serviced the car on May 31, the revenue was earned on that date.