[khavson]

You are required to explain to a friend without no accounting knowledge why revenues and expenses recorded in profit and loss account do not necessarily represent receipt and payments made during the period which the profit and loss account covers. Use 3 examples.

[pready]

Think about how and when a company records revenues and expenses. Also think about how Prepaids are handled.

For some examples think about when a company provides a service like landscaping, then bills their customer.

Think about when you purchase a magazine subscription and how a company would recognize revenues during the time of the subscription.

Think about when a company purchases inventory for resale on credit.

You need to think about the various ways and when a company records revenues and expenses.