Question

If a company is using the accrual basis accounting method, when should it record its earned revenue?

a. when cash is received, even though services may be rendered at a later date
b. when services are rendered, even though cash may be received at a later date
c. when services are completely rendered and cash is received
d. when cash is received, 30 days after the completion of the services

Answer 1

Answer: b

Under the accrual basis of accounting, expenses are matched with the revenues related to it and/or are reported when the expense occurs, and not just when the cash is paid. The company should record its earned revenue when services are rendered. Payment may come at a later date.