Mr Ali who is running a wholesale business of supplying plastic containers to Supermarket in Sharjah is
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Question:
Mr Ali who is running a wholesale business of supplying plastic containers to Supermarket in Sharjah is your good friend. He needs to prepare Income statement for the year ending 2022 but he is not aware of financial principles and concepts much so he approaches you to guide him regarding following two transactions recording.
A. The client gave payment of $5,000 on 19 May,2022 which was the date of entering in the contract with Mr. Ali for delivering 100 Plastic containers on 3rd July.
B. Mr. Ali paid the rent of $1,000 on 2nd May for his office for the next month also.
Explain to him which principle he should apply and when he should recognize both A & B amounts to record in the books of accounts.
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