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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

What Would You Do?

You are responsible for preparing all of the journal entries for Regional Financial Services. You have correctly prepared the following entry for financial services provided on December 15:

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Your boss has asked you to change the date from December 15 to January 15 so that the business’s profit, and thus taxes, would be lower. Are you allowed to do this? What is your response to your boss? Flow should you handle this situation?

To determine

Explain whether it is allowed to record the revenue received on December 15 could be recorded as for received on January 15, and provide reasons supporting the decision.

Explanation

Revenue recognition principle: This is an accounting principle that requires to record the earned revenue when it is either or realizable.

It is not allowed to record the revenue received on December 15 as is received on January 15. The main considerations for revenue recognition are explained as follows:

  • Being realized or realizable: Revenue is considered as realized when the revenue is earned and received. Revenue is considered as realizable when the revenue is earned but not received...

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