A state provides a city with a grant of $500,000 for a special "meals for the homeless" program. The city will receive payment from the state within 30 days of incurring eligible expenditures for the program. The city's policy is to consider "available" any amounts collected no more than 60 days into its next fiscal year. When should the city recognize revenues under this grant?

Question

Joanna Lara

Business

17 May, 22:26

A state provides a city with a grant of $500,000 for a special "meals for the homeless" program. The city will receive payment from the state within 30 days of incurring eligible expenditures for the program. The city's policy is to consider "available" any amounts collected no more than 60 days into its next fiscal year. When should the city recognize revenues under this grant?

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When it incurs expenditures under the grant

Explanation:

According to the revenue recognition principle, the revenue is recognized when it is earned plus in this question the matching principle is also applied that refers that when revenue is recognized so at the same time the expenditure should also be recorded i. e on same period the revenue and the expenditure should be matched.