Mr Amjad is planning to start a business. He follows various accounting concepts and conventions which helps his business run smoothly. Which accounting concept help him to assume that the revenue is realized? 2.Which could be the different basis of accounting that can help him recording the revenue realized. Explain with examples.

Answered: Mr Amjad is planning to start a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mr Amjad is planning to start a business. He follows various accounting concepts and conventions which helps his business run smoothly.

Which accounting concept help him to assume that the revenue is realized?

2.Which could be the different basis of accounting that can help him recording the revenue realized. Explain with examples.

Expert Solution

Step 1: Definition

Revenue recognition:

Revenue recognition refers to an accounting principle which outlines the specific conditions for the revenue in accounting. The conditions for revenue recognition are as follows:

Risks and reward of ownership are transferred from seller to the buyer.
The seller must not have the control over the goods that are sold.
Collections of payments are reasonably assured.
The amount and cost of revenue must be reasonable.

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