[ag1214]

@mikelittle said:
Some of the receivables had actually paid so the entry for them was to reduce revenue and increase current liabilities

By the way, why to reduce revenue and increase liabilities?

[ag1214]

Thank you very much.

[ag1214]

Thx for the explanation.

I want to know the distinguish merits and demerits between both approaches;
Directional Testing Vs Transaction Cycle.

As both are used in same circumstances, as i know of, why choose one over the other?

What benefits are realised by taking one approach over the other?

Thank you.

[ag1214]

Thank you very much.

[ag1214]

Got that.
So, making it clearer.

Making 3 scenarios so that i can understand it clearer.

1. Let’s say that the company depreciates on a monthly basis.
2. Let’s say that the company depreciates on an annual basis pro-rated.
3.Let’s say that the company depreciates on an annual basis (full year in the year of purchase, none in the year of sale)

Implications of it, in each of it?

Thank you.

[ag1214]

Yes, to a great extent. Thank you.

So, if risks and rewards are transferred at let’s say, 31 December of the year.
However, invoice is have not been generated due to some operational failure or for some other reason until 2 January.

Whether revenue should be recognised on 31 December or on 2 January?

Thank you.

[ag1214]

Thank you for the answer.

Can you kindly provide an example, where the above (or similar) circumstances are implied in real life situation? So that I can understand the situation more effectively.

[ag1214]

Yes. This clarifies and helped me to sought more about the topic.
Thank you

[ag1214]

Got 80%..:)

[ag1214]

Got 80% in FMA…:)

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