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James's Tune-up Shop follows the revenue recognition principle. Jim finished repairing a car on July 31....

James's Tune-up Shop follows the revenue recognition principle. Jim finished repairing a car on July 31. The customer picked up the cas on August 1 and mailed the payment to James on August 5. James received the check in the mail on August 6.

What date should James show that the revenue was earned? Justify your answer.

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Answer #1

James should recognize revenue on July 31.

It is because as per revenue recognition principle, revenue should be recognized when either of the parties have finished their obligation. As James finished his obligation on July 31, even though the payment was received later, James should recognize revenue on July 31.

Please feel free to ask any queries. Thank you.

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