Durning May Ses the World Cruises Inc collected 1000 cash fr

Durning May. Ses the World Cruises, Inc collected $1,000 cash from a customer for services to be provided duning June Which of the following statements about this transaction as correct? O $1000 of revenue should be recorded in May $500 of revenue should be recorded in May and $500 in June $1,000 of revenue should be recorded June O No revenue should be recorded for these events because they relate only to the balance sheet

Solution

Solution: Answer is 3rd option $1000 of revenue should be recorded in June Working Notes: As per Revenue recognition principle , revenue should be recorded in the month in which it is realized or realizable and earned. It does not depend when the cash is received or receivable. Since, the services will be rendered in June , in other word will be earned in June , hence, all the revenue of $1,000 will be recognized in JUNE. Please feel free to ask if anything about above solution in comment section of the question.