A flower shop makes a large sale for $1,000 on November 30th. The customer is sent a bill on December 5 and the flower shop receives payment on December 10th. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized?

Question

Business

Theresa Rice

2 July, 02:51

A flower shop makes a large sale for $1,000 on November 30th. The customer is sent a bill on December 5 and the flower shop receives payment on December 10th. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized?

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Lilah · Answer 1

The revenue is to be recognised on November 30.

Explanation:

Under GAAP, the revenue is to be recognised when goods are delivered or services are performed.

The revenue can be recognised even of the billing is delayed as in this case when it was billed on December 05.

The receipt of payment is only to reflect a previously created receivable account and is not to be considered for revenue recognition under GAAP