Question

Utilities Expense Cash Income Net Income 24 M3-2 Identifying Accrual Basis Revenues The following transactions are July activities of Bill's Extreme Bowling, Inc., which operates sev- eral bowling centers. If revenue is to be recognized in July, indicate the amount. If revenue is not to be recognized in July, explain why. Amount or Explanation Activity a. Bill's collected $12,000 from customers for services related to games played in July. b. Bill's billed a customer for $250 for a party held at the center on the last day of July. The bill is to be paid in August. c. The men's and women's bowling leagues gave Bill's advance payments totaling $1,500 for the fall season that starts in September. d. Bill's received $1,000 from credit sales made to customers last month (in June). M3-3 Identifying Accrual Basis Expenses The following transactions are July activities of Bill's Extreme Bowling, Inc., which operates sev

Answer 1

The concept of accrual basis of accounting for revenue is, revenue should be recognised in the period in which the services rendered irrespective of cash receipts.

a. Revenue = $12,000 (Reason: Service is rendered in the month of July)

b. Revenue = $250 (Reason: Service is rendered in the month of July)

c. No revenue to be recognised in July. Revenue is received in advance for the services to be rendered in September. (Reason: Revenue will be recognised is September when service is rendered)

d. Revenue is related to service rendered in June. The revenue should be recognised in June.