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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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24 comments · newest first
IL
Iluminada
10 months ago
March 1st is definitely the right call here.
OR
Oren
10 months ago
Seems odd to count it before payment, right?
JO
Josefa
10 months ago
Totally agree, it's accrual accounting!
CA
Caprice
10 months ago
Revenue is recorded on March 1st.
AS
Asha
11 months ago
Wait, why not wait until payment clears?
TE
Tess
11 months ago
I keep mixing up the dates, but I feel like it might be when the payment is received, which would be April 5th. Is that right?
BE
Bernardo
11 months ago
This question reminds me of a practice problem we did where revenue was recognized at the point of sale. So, I would go with March 1st.
BA
Barbra
12 months ago
I'm not entirely sure, but I remember something about recognizing revenue when it's earned, which seems to be on March 1st too.
DE
Desmond
12 months ago
I think the revenue should be recorded on March 1st since that's when the shipment was made and the invoice was issued.
ME
Merissa
1 year ago
I'm pretty confident on this one. Since Alpha is using accrual accounting, the revenue should be recorded on March 1st when the product is shipped, regardless of when the payment is received.
LI
Ling
1 year ago
This is a tricky one. The question mentions the payment clearing the bank on April 8th, so I'm wondering if that's the date the revenue should be recorded. I'll need to review the accrual accounting principles to be sure.
WI
William
1 year ago
Okay, I think I've got it. With accrual accounting, the revenue is recognized when the performance obligation is satisfied, which is when the product is shipped on March 1st. The payment terms don't affect when the revenue is recorded.
GE
Georgene
1 year ago
Hmm, I'm a little unsure about this one. The payment terms are net 30 days, so does that mean the revenue can't be recorded until the payment is received on April 5th? I'll have to think this through carefully.
LA
Lai
1 year ago
This one seems straightforward - the question is asking when Alpha records the revenue, and since they're using accrual accounting, it should be when the product is shipped, which is March 1st.
AR
Arlette
1 year ago
But shouldn't revenue be recognized when payment is received, which is on April 5th?
GR
Gregoria
1 year ago
B) March 31st is the correct answer. The revenue should be recorded at the end of the accounting period, which is March 31st.
MA
Mariann
10 months ago
So, March 31st makes sense then?
ER
Ernest
10 months ago
Nope, accrual accounting changes that.
ER
Erasmo
11 months ago
I thought it was March 1st.
WE
Weldon
11 months ago
Exactly, revenue is recorded at period end.
LE
Lemuel
1 year ago
I agree with Daniel, because that's when the order was shipped.
BU
Burma
1 year ago
D) April 8th seems like the right answer to me. That's when the payment cleared the bank, so that's the date the revenue should be recognized.
IR
Irene
1 year ago
I think the correct answer is C) April 5th. That's when the customer's payment was received, and that's when the revenue should be recorded under accrual accounting.
DA
Daniel
1 year ago
I think the revenue should be recorded on March 1st.