William's Music is a store that buys and sells musical instruments and uses a periodic inventory system. Transactions for the business are shown below: Nov. 2 4 5 7 8 10 12 13 16 20 22 Purchased two electric guitars from Fender Supply Limited, on account, at a cost of $900 each, terms 1/10, n/60. Made a cash sale of two keyboards for a total invoice price of $2,300. The cost of each keyboard was $900. Received a credit from Western Acoustic Inc. for the return of an acoustic guitar, which was defective. The original invoice price was $450 and the guitar had been purchased on account. One of the keyboards from the cash sale of Nov. 4 was returned to the store for a full cash refund because the customer was not satisfied with the instrument. Purchased store supplies for cash from a stationery store. The price of the supplies is $225. Sold one Omega trumpet to the Toronto Regional Band, on account, for an invoice price of $2,700. Terms are 1/10, n/60. The trumpet had cost William's Music $1,420. Made a payment on account for the amount owing to Fender Supply Limited for the purchase of Nov. 2. Purchased two saxophones from Yamaha Canada Inc. on account. The invoice price was $2,500 for each saxophone. Terms are 1/10, n/30. Returned to Yamaha Canada Inc. one of the saxophones purchased on Nov. 13, as it was the wrong model. Received a credit from Yamaha for the full purchase price. Received a cheque for the appropriate amount from the Toronto Regional Band for the purchase of Nov. 10. Paid balance owing to Yamaha Canada Inc.

Income reported for a business entity depends on the proper recognition of revenues and expenses. In certain cases, costs are recognised as expenses at the time of product sale and in other situations costs are capitalised if they bring future benefits.In around 250 words, comment on the above statement. Your comments should include valid examples and illustrations.

According to Generally Accepted Accounting Principles (GAAP), revenue is recognized as income when: a contract is signed to perform a service or deliver a good. managers decide to recognize it. payment is requested. income taxes are paid on the revenue earned. the transaction is complete and the goods or services are delivered.

For each of the following, indicate whether the item would be reported on the balance sheet (B/S),reported on the income statement (I/S), or not shown in the financial statements (Not) and whetherit relates to a service company (SC) or merchandising company (MC).Financial Statement Type of CompanyInventorySales RevenueCost of Goods Available for SaleService Revenue