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Kim Smith.
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Noah098
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credit notes issued post yr end would identify possible overstatement of income rather than understatement.
Maam could you explain this statement with the help of an example?
Kim Smith
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In December, Apple Co raises an invoice for $10,000: Dr Receivable/Cr Revenue
In January, it cancels the invoice with a credit note: Dr Revenue/Cr Receivable
If the credit note isn’t accrued at 31 December: Dr Revenue/Cr Credit note accrual (which would be offset against trade receivables in SoFP), revenue will be overstated.
Noah098
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