Great Visions Company entered into a contract with ABC Carpet Company on January 15, 2020. The delivery date of March 1 was specified in the contract, but Great Visions did not deliver until March 31, 2020. According to the contract, a full payment of $75,000 was due 30 days after delivery. When should this contract be recorded?

Question

Business

Akira Krueger

21 August, 22:58

Great Visions Company entered into a contract with ABC Carpet Company on January 15, 2020. The delivery date of March 1 was specified in the contract, but Great Visions did not deliver until March 31, 2020. According to the contract, a full payment of $75,000 was due 30 days after delivery. When should this contract be recorded?

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Answers (1)

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Maryjane Bartlett · Answer 1

March 31, 2020

Explanation:

The accrual accounting principle states that you must record transactions in the accounting periods in which they occur, and the conservatism principle states that revenues should only be recorded when the earning process has been substantially completed.

In this case, only March 31 fulfills both requirements, since the goods were delivered on that day: same accounting period + earning process completed.