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25 July, 12:04

he ABC Company operates a catering service specializing in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Collections from customers have never been an issue in the past. ABC should recognize revenue from its catering services at the date when a

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  1. 25 July, 12:11
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    Answer: b. Luncheon is served.

    Explanation:

    The Accrual Basis in Accounting requires that Revenues are recorded when they are earned as well as Expenses being recorded when incurred. Revenue is not to be recorded when the services have been paid for when when an order has been made. They are to be recorded when the service has been fulfilled or the goods delivered.

    In the above case, ABC is a caterer and their main business is to serve business luncheons for large corporations.

    This means that their service is done when they serve these luncheons. This should be when the revenue should be recognized then because this is when their service was delivered.
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