Comparing accrual and cash-basis accounting, and applying the revenue recognition principle [5-10 min]
Momentous Occasions is a photography business that shoots videos at college parties. The freshman class pays $100 in advance on March 3 just to guarantee your services for its party to be held April 2. The sophomore class promises a minimum of $280 for filming its formal dance, and actually pays cash of $410 on February 28 at the party.
Requirement
1. Answer the following questions about the correct way to account for revenue under the accrual basis.
a. Considering the $100 paid by the freshman class, on what date was revenue earned? Did the earnings occur on the same date cash was received?
b. Considering the $410 paid by the sophomore class, on what date was revenue earned? Did the earnings occur on the same date cash was received?
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