The following transactions occurred during July. What was the amount of revenue

Question

The following transactions occurred during July. What was the amount of revenue for July? Explain.

1. Received 900 cash for services provided to a customer during July
2. Received 2200 cash investment from Barbara Hanson, the owner of the business.
3. Received 750 from a customer in partial payment of his account receivable which arose from sales in June.
4. Provided services to a customer on credit, 375.
5. Borrowed 6000 from the bank by signing a promissory note.
6. Received 1250 cash from a customer for services to be rendered next year.

Explanation / Answer

Revenue arises when a good has been provided or a service has been performed. These goods or services can be provided either for cash or on account. Cash received in advance of a good being provided or a service being performed does not count as revenue yet, because it has not been earned. Receiving cash on an old account receivable does not count as revenue in the period the cash was received. It counted as revenue in the prior period. Bottom line, receiving cash does not necessarily indicate the earning of revenue. Also, not receiving cash does not necessarily mean that revenue has not been earned. I'll do the first few questions, and you can do the rest. 1. Count the $900 as July revenue. The services have been performed, and therefore, the revenue has been earned. 2. Not revenue. This receipt of cash most likely indicates the owner receiving an equity stake in the company in exchange for her investment. As you read the rest of the questions, pay close attention to what the company is receiving money for and whether or not it has provided the customer with a good or service yet. Good luck.

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