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The Reason That We Must Adjust Revenue for the Change

question 181

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The reason that we must adjust revenue for the change in trade receivables to convert the figure to cash collected from customers is that trade receivables represent sales revenue not collected from customers at the beginning and at the end of the accounting year.


Definitions:

Business Trust

A legal arrangement in which trustees manage assets for the benefit of beneficiaries, often used in business for tax or estate planning.

Joint Stock Company

A business entity wherein the capital is divided into shares owned by its stockholders, who share the profits and liabilities.

Investment Group

A collective of individuals or entities that pool their resources to invest in various ventures or securities.

Joint Venture

A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task, project, or business activity.

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