In reviewing your company’s income statement from the prior year you noticed that sales revenue were up by 17%, the gross sales breakdown was 70% credit sales and 30% cash sales. Your company uses the accrual accounting method to record its transactions. You have been asked to assist the marketing team in putting together its budget for the company’s campaign initiative to increase sales over the next 12 months. Marketing also saw the sales numbers from the prior year’s income statement and assumes the company can afford to go all out.
- Consider the information provided above, explain to the marketing team about relying on the prior year’s income statement as it relates to your understanding of accounting transactions, the revenue and expense recognition principles, and accrual accounting
- Which statements and reports would you recommend marketing review in determining the budget and why?