Question

A customer purchased a drill press on November 14 on account from Sears. The drill press was delivered two weeks later. The customer paid for the drill press on December 5. When should Sears record the revenue for this transaction according to the revenue recognition principle?

Answer 1

Answer:

November

Explanation:

Revenue Recognition Principle is the one in which the accounting guideline, require that the revenues to be shown or recorded on the income statement in the year or period in which they are earned, not in the year or period in which they are paid or cash is collected.

So, in this case, On November 14, the revenue should be recorded by Sears as the customer purchased the item on this date not on December 5 when cash is collected.