Unit $2$ Group Project

Accounting Chapter $3$:

Group project $7$: Accrued revenue

The following is an excerpt from a conversation between Monte Trask and Jamie Palk just before they boarded a flight to Berlin on American Airlines. They are going to Berlin to attend their company's annual sales conference.

Monte: Jamie, aren't you taking an introductory accounting course at college?

Jamie: Yes, I decided it's about time I learned something about accounting. You know, our annual bonuses are based on the sales figures that come from the accounting department.

Monte: I guess I never really thought about it$.$

Jamie: You should think about it$!$ Last year, $1$ placed a $$900,000$ order on December $27.$ But

when I got my bonus, the $$900,000$ sale wasn't included. They said it didn't ship until January $5,$ so it would have to count in next year's bonus.

Monte: A real bummer!

Jamie: Right! I was counting on that bonus including the $$900,000$ sale.

Monte: Did you complain?

Jamie: Yes, but it didn't do any good. Sophia, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final. I figured I$\text{'}$d take the accounting course and find out whether she's just jerking me around.

Monte: I never really thought about it$.$ When do you think American Airlines will record its revenues from this flight?

Jamie: Hmmm, I guess it could record the revenue when it sells the ticket $....$ or when the boarding passes are taken at the door $...$ or when we get off the plane $...$ or when our company pays for the tickets $....$ or I don't know. I'll ask my accounting instructor.

$"$ Discuss when American Airlines should recognize the revenue from ticket sales to properly match revenues and expenses."