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…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter2: Introduction To Financial Statements

Section: Chapter Questions

Problem 9Q: What is the accounting equation? List two examples of business transactions, and explain how the...

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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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