Question

.What is the impact on income when the actual sales figures are used?

Answer 1

There are chances that actual sales figures include unearned sales revenue which needs to transferred from current year sales to unearned revenue as it pertains to the subsequent years. It will lead to reporting of higher income if actual sales figures are used in the current year and reporting of lesser income in the subsequent years. The income statement will not reflect the true income of any particular year.

Hence, actual sales figures should not be used, accrual basis of accounting principle needs to be followed to report the correct income or loss.