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On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received?

Respuesta :

Answer:

Revenue recognition principle

Explanation:

According to this accounting principle, the revenue is recorded when they earned or realized not when the cash is received.

In the given situation, the contract was signed for $40,000 which is recorded in the following year and not that year in which the cash is received which reflects that the company follows revenue recognition principle.

It also shows more authentic picture of the business organization.

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