Question

According to the revenue recognition principle, if a company provides services to a customer in the current year but does not collect cash until the following year, the company should report the revenue in the current year.

A. True
B. False

Answer 1

Answer:

A. True

Explanation:

The revenue recognition principle state that revenue is recognized as soon as goods are passed to the customer  in exchange for valuable consideration.  It state that we record revenue in the period in which we earn it and not necessarily the period in we receive cash.  

So, if a company provides services to a customer in the current year but does not collect cash until the following year, the company is mandated to report the revenue in the current year according to the revenue recognition principle