Question: Metro Parking which operates a seven story parking building has a
Metro Parking, which operates a seven-story parking building, has a calendar year-end. It serves daily and hourly parkers, as well as monthly parkers who pay a fixed monthly rate in advance. The company traditionally has recorded all cash receipts as revenues when received. Most monthly parkers pay in full during the month prior to that in which they have the right to park. The company’s auditors have said that beginning in 2014 the company should consider recording the cash receipts from monthly parking on an accrual basis, crediting Unearned Revenues. Total cash receipts for 2014 were $1,250,000, and the cash receipts received in 2014 and applicable to January 2015 were $62,500. Discuss the relevance of the accounting concepts of consistency, full disclosure, and materiality to the decision to record the monthly parking revenues on an accrual basis.
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