Horizon Real Estate Company usually Issues rent Invoices to its tenants at the beginning of every quarter. It recognizes the monthly rent revenue on the first day of each month. However, some…

Question

Options

• APayment term can be set to defer the monthly rent revenue.
• BInvoicing rules can be set to defer the monthly rent revenue.
• CAccounting rules can be set to defer the monthly rent revenue.
• DPayment term can be set to allow customers to make payments in two installments.
• EInvoicing rules can be set to allow customers to make payments in two installments.
• FAccounting rules can be set to allow customers to make payments in two installments.

• A
  2% (1)
• B
  8% (4)
• C
  82% (42)
• E
  2% (1)
• F
  6% (3)

Explanation

Accounting rules (C) handle when revenue is recognized - since Horizon issues quarterly invoices but must recognize revenue monthly, accounting rules can spread (defer) that revenue across the appropriate periods. Payment terms (D) control when and how customers pay - they support installment schedules, so splitting a monthly payment into two installments (15th and last day) is exactly what payment terms are designed for.

Why the others are wrong:

• A - Payment terms govern payment schedules, not revenue recognition; they cannot defer revenue.
• B & E - Invoicing rules only determine when the receivable is created (in advance vs. in arrears); they neither defer revenue nor split payments into installments.
• F - Accounting rules manage revenue timing on the GL side, not customer payment schedules.

Memory tip: Split the requirement into two sub-problems - "Who owes what and when do they pay?" → Payment Terms. "When does the company book the revenue?" → Accounting Rules. If you keep those two purposes cleanly separated, C and D become the obvious pair.

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