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The Alpha company ships an order to a customer on March 1st and invoices the customer for the product with the shipment, with payment terms of net 30 days. The customer's payment is received on April 5th. The payment clears the bank and shows on Alpha's account on April 8th. If Alpha is using accrual accounting, when does it record the revenue for this sale?
Suggested Answer: A
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37 comments · newest first
OZ
Ozell
11 months ago
Yup, March 1st is the right answer!
CH
Charisse
11 months ago
I thought you had to wait for the cash to actually come in.
LA
Laurel
11 months ago
Wait, so they record it before the payment clears? That seems odd.
CR
Cristal
12 months ago
Totally agree, it's all about when the sale happens, not when payment is received.
EL
Elroy
12 months ago
Revenue is recorded on March 1st under accrual accounting.
TW
Twila
1 year ago
I thought it might be when the payment clears, but I guess that's not how accrual accounting works? So maybe March 1st?
MA
Malinda
1 year ago
I practiced a similar question, and I believe it was about recognizing revenue at the point of sale, so March 1st feels right.
AJ
Aja
1 year ago
I'm a bit unsure, but I remember something about recognizing revenue when it's earned, which seems like it would be March 1st too.
TI
Tiffiny
1 year ago
I think the revenue should be recorded on March 1st since that's when the shipment and invoice happened.
DI
Dierdre
1 year ago
I'm pretty confident the answer is D. The revenue is recorded when the payment clears the bank on April 8th, not when it's received on April 5th.
QU
Quiana
1 year ago
Based on the accrual accounting concept, I believe the revenue should be recorded on March 31st, since that's the end of the 30-day payment period.
TI
Tiera
1 year ago
I'm a little confused on the difference between when the payment was received and when it cleared the bank. Does that matter for revenue recognition?
HE
Hester
1 year ago
Okay, I've got this. The key is that the revenue should be recorded when the customer's payment is received, which is April 5th.
RE
Remona
1 year ago
Hmm, this seems like a tricky one. I'll need to think through the accrual accounting principles carefully to determine the right answer.
JO
Joana
1 year ago
Wait, is this a trick question? What if the answer is 'all of the above' because it's a leap year or something?
CH
Charolette
1 year ago
C) April 5th
EL
Eladia
1 year ago
The revenue is recorded when the order is shipped.
AL
Alyce
1 year ago
A) March 1st
EL
Elenor
1 year ago
Hmm, I'm a bit stumped on this one. Maybe I should have paid more attention in my accounting class.
DO
Donette
1 year ago
Oh, I see. Thanks for the clarification!
BE
Benton
1 year ago
That's correct, revenue should be recognized when the product is shipped.
CA
Carin
1 year ago
You should record the revenue on March 1st.
KE
Kenia
2 years ago
I'm going with April 5th. That's when the customer's payment was received, so that's the revenue recognition date.
NI
Nicolette
1 year ago
User3: I'm going with April 5th. That's when the customer's payment was received, so that's the revenue recognition date.
GR
Gregoria
1 year ago
User2: I agree with User1, revenue should be recognized when the product is shipped.
HE
Helga
1 year ago
User1: I think it should be March 1st, when the order was shipped.
AL
Alline
2 years ago
April 8th, for sure. That's when the payment actually showed up in Alpha's account, which is the key date for accrual accounting.
JA
Jani
1 year ago
Exactly. It ensures that financial statements accurately reflect the company's performance during a specific period.
PA
Pansy
1 year ago
That makes sense. It's all about matching revenue with the period in which it was earned.
SH
Sharee
1 year ago
So, the revenue for this sale would be recorded on April 8th when the payment cleared the bank.
CH
Chau
2 years ago
Yes, you're right. Accrual accounting records revenue when it is earned, regardless of when payment is received.
VA
Vallie
2 years ago
March 1st, of course! That's when the order was shipped and invoiced. Easy peasy.
WA
Wai
1 year ago
Exactly, the revenue should be recorded on March 1st since that's when the sale was made.
AN
Annett
1 year ago
March 1st
DO
Dottie
2 years ago
But shouldn't revenue be recognized when payment is received? So, it should be recorded on April 5th.
CA
Cassandra
2 years ago
I agree with Leonora, because that's when the order was shipped.
LE
Leonora
2 years ago
I think the revenue should be recorded on March 1st.