This month, a company receives $5,000 from a regular customer, of which $3,000 is for products delivered last month and $2,000 is for products that will be delivered next month. How much revenue should the company record for this month?

The accrual principle in accounting states that revenues should match expenses. While the company received $5,000 in cash from the customer, in the current month, it will only have delivered $3,000 in products. In other words, it will only have incurred in the expenses necessary to deliver those $3,000.

For that reason, for the current month, the company will only recognize $3,000 in revenue, while the following month, it will recognize the remaining $2,000.

saimmerchant saimmerchant · Answer 2 · 2021-12-30T19:52:37+01:00

The company should record revenue of $2,000 for this month.

The $3,000 received is for the last month, which means that the revenue for this transaction was recorded last month with an increase in accounts receivable. Therefore, this month the accounts receivable will be decreased with an increase in cash.

However, in the case of $2,000 the transaction is being made for future sales. The transaction would be recorded as an increase in revenue (sales) and an increase in cash.

Hence, only $2,000 will be recorded as revenue for this month.

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