When is a receivable recorded by a service organization?

When is a receivable recorded by a service organization?

When is a receivable recorded by a service organization?

Answer:

In a service organization, a receivable is recorded when the service is provided on account. It follows the Accrual Accounting method, which revolves around the service performed, not when the payment is received.

In accounting terms, a receivable in a service organization is recorded when the service is provided on account.

This principle is in line with the Accrual Accounting method, which records revenues and expenses when they are incurred, not necessarily when cash changes hands.

So, even if the related expenses are incurred, the customer pays, or the bill is sent to the customer is irrelevant to when the receivable is recorded.

It's all about when the actual service is provided on account.

For example, if a Lawn Care Company provides a service of mowing a lawn in July, but doesn't receive payment until August, the company would still record the revenue in July when the service was performed (thus creating a receivable), not in August when the money was received.