Case 3-2 please
Discuss when American Airlines should recognize the revenue from ticket sales to prop match revenues and expenses. erly Case 3-2 Adjustments for financial statements Several years ago, your brother opened Ready Appliance Repairs. He made a small initial investment and added money from his personal bank account as needed. He withdrew money for living expenses at irregular intervals. As the business grew, he hired an assistant, He is now considering adding more employees, purchasing additional service trucks, and purchasing the building he now rents. To secure funds for the expansion, your brother submitted a loan application to the bank and included the most recent financial statements (shown below) prepared from accounts maintained by a part-time bookkeeper. READY APPLIANCE REPAIRS Income Statement For the Year Ended March 31, 20Y6 $182,500 $41,200 6,500 102,150 80,350 9,100
Ans: 1) There is no liability in the books and even no provision for salary, depreciation is being made at the year end clearly indicates the books were not maintain following the accrual concept of accounting.
Ans 2: Depreciation on truck should be recognised, and any expenses which is due but unpaid should also be recognised in the books if account to provide it a shape of an accruate set of financial statements.