Question

Ron's Hot Rod Shop follows the revenue recognition principle. Ron services a car on July 31st. The customer picks up the vehicle on August 1, and mails the payment to Ron on August 5. Ro receives the check in the mail on August 6. When should Ron show that the revenue was earned?

Answer 1

On July 31st, the Ron show that revenue was earned

Step-by-step explanation:

Revenue Recognition Principle: Under this principle, the revenue is recorded when it is earned whether cash is collected or not. It records in accruals basis of accounting not in cash basis of accounting

In other words, when service is completed on that date the revenue is recorded in the books of accounts, not with that date on which cash transactions was made or picking up date.

Thus, on July 31st, the Ron show that revenue was earned