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
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
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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