Question

1. Explain the principles of accounting on which these comments are based on:
a)Caliber or quality of management team not directly disclosed in the Balance sheet.
b) Advance received from a supplier not taken as income or sales.
2. Do you think that a transaction can break the Accounting Equation?

Answer 1

Answer:

Advance recieved from a customer is not taken as income or Sales. ... So, when we receive Advance from customers , it is basically the amount provided by customers early but the actual revenue has not been earned yet.

: A transaction can not be break the Accounting Equation because in Double Entry System, every transaction has two effect or it can be said every transaction effect both the side of Accounting Equation i.e. Liability+Capital side as well as Assets side. therefore, it will never break.

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