Task: Revenue recognition
You are controller for an architectural firm whose accounting year ends on December 31. As part of the management team, you receive a year-end bonus directly related to the firm's earnings for the year. One of your duties is to review the transactions recorded by the bookkeeper. A new bookkeeper recorded the receipt of $10,000 in cash as an increase in service revenue.
The $10,000 is a deposit and the bookkeeper explains to you that the firm plans to provide the services to the client in March of the following year.
1. Did the book keeper correctly record the client's deposit? Explain your answer.
2. What would you do as a controller for the firm? Do you have a responsibility to do anything to correct the books? Explain your answer.