Final answer:
To verify sales revenues are in the correct period, review invoice dates, examine contracts, compare with bank receipts, and apply accrual accounting principles to match revenues and expenses in the period earned.
Step-by-step explanation:
To verify whether sales revenues are recorded in the correct accounting period, it is crucial to match revenue with the period in which it is earned, a concept known as revenue recognition. This can be done through several steps:
- Review the dates of invoices and sales receipts to ensure they are within the correct accounting period.
- Examine contracts and sales agreements to determine the timing of revenue recognition.
- Compare the sales ledger to actual bank receipts to confirm that the revenue has been realized or is realizable.
- Use accrual accounting methods to match sales revenue with the expenses incurred in earning it, thus ensuring revenue is recorded when earned, not necessarily when cash is received.
For example, if a company's policy is to recognize revenue when goods are shipped, the shipping dates should align with the recorded sales dates.