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Chapter 2: Q22Q (page 61)

Selane Eatery operates a catering service specializing in business luncheons for large corporations. Selane requires customers to place their orders 2 weeks in advance of the scheduled events. Selane 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. Conceptually, when should Selane recognize revenue related to its catering service

Short Answer

Expert verified

Selane recognizes revenue from catering services provided by the Selane eatery.

Step by step solution

01

Meaning of Revenue Recognition

Revenue recognition refers to the criteria that are required to be fulfilled before recording revenue in books of accounts. It is extracted from the sale of goods and the performance of service.

02

Appropriateness of Controller advice

Revenue is recognized by the seller or service provider when the seller or service provider meets performance obligations. Selane Eatery will meet performance obligations when it delivers luncheons to its customers; therefore, Selane Eatery recognizes revenue on the date on which delivery of luncheons is made and not on the date of billing or date receiving payment from customers.

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