Explain if the scenarios violate qualitative characteristics

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Reference no: EM132724585

Previlo Bhd is a renowned furniture manufacturer in Malaysia. It has a year end of 30 September 2019. The directors require advice about the following situations.

(i) A customer placed an order for 'Furniture X10' that amounted to RM20,000 on 10 September 2019. The product was delivered to the customer on 2 October 2019 and the transaction was recognised in the current accounting period.

Dr Accounts receivable 20,000

Cr Sales revenue 20,000

(ii) The company sold a piece of land in March 2019 to Shuang Bhd at RM1.2 million. The land was initially bought at RM900,000. The director requested the company to recognise any gain or loss from the sale of the land to his personal account and the following journal entry was prepared.

Dr Bank 1200000

Cr Amount owed to director 300000
Cr Land 900000

(iii) An annual insurance of RM120,000 was paid by the company on 1 September 2019. As at the financial year end, the accountant prepared only the following journal entry.

Dr Prepaid insurance 120,000

Cr Cash 120,000

REQUIRED:

Problem 1: Explain if the above scenarios violate the qualitative characteristics, assumptions or principles under the Conceptual Framework. Your answer should be supported with (any) correct journal entry as at 30 September 2019.

Reference no: EM132724585

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