Financial accounting Assignment Example | Topics and Well Written Essays - 1250 words

Financial accounting - Assignment ExampleThis is regardless on the time when the property is actually received. In a sale proceed, the gross is know when the ownership of a good or a commodity has been transferred to the buyer together with the associated risks. The amount of the proceeds has to be reliably measurable in terms of tax revenue. Similarly, the costs associated with the transaction should also be measurable in a reliable way. Finally, there has to be a probability that the economic benefits related to the transaction exit flow or will be realised by the organization. The same criteria apply for run rendered. In case of dividends, the revenue should be recognized once the right for payment has been established (IFRS, Pg. 2). In accounting, it is important to distinguish between the terms income, revenue and gains since it will facilitate accurate and clear preparation of the monetary statement (Agtarap-San, Pg. 5). Income is defined as the savings opportunity tha t a business entity gains within a given time and it is measured in monetary terms (Weitzman, Pg. 2). Revenue on the other hand is the income that a business entity realises from its usual trading operations such as the sale of goods and services (ACCA, Para 5). Finally, gains refer to the increase in shareholders equity as a result of a transaction other than the daily operations. These are legal proceeding which are non- recurring, for instance sale of a fixed asset (Weltman, Pg. 70). Case Study Ibi Ryan Plc According To IAS 18, revenue should be recognized when earned. As such, the sale of Electrical goods on 30th March should be include in the revenue for the period ended 31st March 2013. This is because it was earned within the period disrespect the event that the delivery was delayed to the following period. A total of ?50, 000 should be included in the financial statements. The revenue generated from the sale proceeds of good sold to Witney Ltd should not be included in t he revenue of the period ended 31st March since Ibi Ryan retained ownership of the goods. According to IAS 18, revenue is only recognized when ownership has been transferred. In addition, the announcement that the creditor would receive 50p for every 1? owed did not guarantee future economic benefits since Whitney Ltd did not state it conclusively. It stated that it is likely meaning there was no guarantee and hence this should not also be recognized in the revenue of that period. The total amount of ?600, 000 owing to Ibi Ryan from Witney Ltd as at 31st March 2013 could not be recognized as revenue for the period due to the fact that ownership of goods worth that amount was not yet transferred. The cost price should also not be charged to the periods revenue. When Ibi Ryan entered a contract with PC4U, it was accredited that the amount of the contract will be realised by the company in the future upon delivery of the laptops. However, in the contract, it was agreed that Ibi Ryan w ould provide jut out services for a period up to December 31st, 2015. The support services were to cost ?240, 000 each year. It was certain that these costs were to b incurred. The costs were also reliably measured. The profits to be realised from the support services were to be 25% of ?240, 000 which is equal to ?60 000. Similarly, the company was certain to get this revenue though in the future. Therefore, the revenue that would be included in the period ended