If a service is performed in December and billed in January, under accrual basis revenue is recognized in:

If a service is performed in December and billed in January, under accrual basis revenue is recognized in:

• A. December
• B. January
• C. When cash is received
• D. When the bill is sent

Answer: (A)

Under accrual accounting, revenue is recognized when it is earned, not when cash is received or when an invoice is sent. If the service is performed in December, the earning occurs in December, so revenue is recorded then. Billing in January doesn’t move revenue to January—it just creates an accounts receivable if not paid yet. The timing of cash or billing is separate from when the service was performed, so December is the correct recognition month.

Under accrual accounting, revenue is recognized when it is earned, not when cash is received or when an invoice is sent. If the service is performed in December, the earning occurs in December, so revenue is recorded then. Billing in January doesn’t move revenue to January—it just creates an accounts receivable if not paid yet. The timing of cash or billing is separate from when the service was performed, so December is the correct recognition month.