Requirement – 1
Accrual basis of accounting:
Accrual basis of accounting means the revenues, and their related expenses of the business are reported during the period in which the event occurs, even if the cash is not exchanged.
The revenue recognition principle
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.
To describe: The four most common revenue-recognition abuses identified by auditors.
Requirement – 2
To describe: The revenue-recognition abuse related to the percentage-of-completion method.
Requirement – 3
To describe: The reasons forrevenue-recognition abuses which tend to increase or decrease net income in the year.
Requirement – 4
To describe: The adjustment that reduced the revenue-recognition abuses.
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