On December 15 of the current year, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in the following year. Which accounting principle would require Myers Legal Services to record the legal fees revenue in the following year and not the year the cash was received?

Question

Quizplus · Accepted Answer

The revenue recognition principle requires that revenue is recognized in the accounting period in which it is earned, regardless of when cash is received. In this case, although cash was received in the current year, legal services will be provided in the following year, and therefore revenue should be recognized in the following year when the work is done.

On December 15 of the Current Year, Myers Legal Services