Asked by Carmen Ortega on May 23, 2024
Verified
Excel Corporation sells $1,000 worth of goods on July 25 on credit.The customer sends the company a check on August 15.The customer receives the goods on September 1.Assuming the company uses accrual accounting,the sale will be recorded in
A) August.
B) July.
C) September.
D) October.
Accrual Accounting
Accounting method that records revenues and expenses when they occur, not necessarily when cash actually changes hands.
Credit
Receiving money, goods, or services on the basis of an agreement between the lender and the borrower that the loan is for a specified period of time with a specified rate of interest.
Sale
The exchange of goods or services for money or other consideration.
- Examine the importance of accounting cycles, accrual-based accounting practices, and the timing for recognizing revenue.
Verified Answer
LP
Lewis Patrick-Balamaga Year 7May 25, 2024
Final Answer :
B
Explanation :
Under accrual accounting, revenues are recognized when earned, regardless of when the payment is received. Since Excel Corporation sold the goods on July 25, the sale is recorded in July.
Learning Objectives
- Examine the importance of accounting cycles, accrual-based accounting practices, and the timing for recognizing revenue.