Concept explainers
If XYZ Consulting performs a consulting service, bills the customer on June 28, and receives payment from the customer on July 19, on what date would revenue be recorded if
- a. XYZ uses the cash basis of accounting?
- b. XYZ uses the accrual basis of accounting?
Record the revenue in which date.
Explanation of Solution
Accrual basis of accounting:
Accrual basis of accounting refers to recognizing the financial transactions during the period in which the event occurs, even if the cash is not exchanged.
Cash basis of accounting:
Cash basis of accounting refers to the recognition of financial transactions only when the cash is received or paid.
Record the revenue in which date:
a. On July19 the revenue is recorded by the Company XYZ because cash has been received from the customer.
b. On July28 the revenue is recorded by the Company XYZ because the revenue has been recognized when it is earned.
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Chapter 3 Solutions
Financial Accounting, Student Value Edition (5th Edition)
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