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    KimberJune's Avatar
    KimberJune Posts: 6, Reputation: 1
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    #1

    Oct 1, 2009, 05:13 PM
    Revenue item not recorded in the year in which earned
    Hi,
    I am preparing a good form multiple-step income statement and a statement of retained earnings for 2008.

    In reviewing the accounts, I recognized that a revenue item of $400 000 was not recorded in 2006, the year in which it was earned.

    I know that there needs to be an adjustment done but I am not sure how ito go about it. Please help. (I think that retained earnings will be affected)??
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #2

    Oct 1, 2009, 09:46 PM

    The situation requires the application of paragraphs 41 - 49 of the IAS 8 - Accounting Policies, Changes in accounting Estimates and Errors.

    The error is material, hence the correction will be made retrospectively and requires full disclosure of the error and the effects of the correction.

    It appears that the error relates to 2006 when the revenue was not recognized. This has resulted in understatement of income of 2006 subject to tax implication.

    In the current year adjust the opening retained earnings with the amount less tax, if any.
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