Periodic reporting adds complexity to accounting by requiring estimates, accruals, deferrals, and allocations. Interim reporting creates even greater difficulties in matching revenue and expenses.
a. Explain how revenue, product costs, gains, and losses should be recognized for interim periods.
b. Explain how determination of cost of goods sold and inventory differs for interim period reports versus annual reports.
c. Explain the interim accounting treatment of period costs such as depreciation.
d. Explain the treatment of the following items for interim financial statements:
(1) Long-term contracts
(3) Seasonal revenue
(4) Flood loss
(5) Annual major repairs and maintenance to plant and equipment during the last two weeks in December