Question

During December, Mainzel Interior Design Corporation redecorated the reception areas of a local hotel. The project was completed on December 31 with payment due in 30 days. Payment was received on January 21 of the following year. When should Mainzel recognize the related revenue using accrual accounting?a. January 21st
b. December 31st
c. January 31st

Answer 1

Answer:

b. December 31st.

Explanation:

Under the accrual method of accounting revenue needs to be recognised when the services are performed.

in case of the question, the services were completed by December 31, the revenue is to be recognised.

The other options for the answers i.e January 21 is the date of payment and is only the recording of the collections, The last option of January 31 is the 30 days credit period allowed and is also not to be considered for revenue recognition purposes.