Question

"Dana bought Chris a gift card to a popular restaurant for $40 on July 27th. Dana gave it to Chris on August 20th. Chris used the gift card as partial payment for a meal at the restaurant on September 2nd. In what month should the $40 be recorded as revenue by the restaurant?
A : September
B : GAAP allows the restaurant to determine the month
C : August
D : July

Answer 1

Answer:

The answer is: A) September

Explanation:

According to conservatism principle, the restaurant should record revenues and assets only when you are sure that they will occur.

Dana bought the gift card on July, but the restaurant didn't know when it was going to be used. So the restaurant should record the revenue from the gift card the month it was used.