A test for revenue is:
A) analyzing the gross margin for the current and prior periods.
B) analyzing the changes in inventory, accounts receivable, and cash for any indication that their trend differs from that implied by the change in sales year over year.
C) analyzing sales returns and allowances for proper disclosure.
D) Both a and c.

Question

Quizplus · Accepted Answer

Tests for revenue often involve analyzing various financial metrics and trends to ensure accuracy and proper disclosure. Analyzing the gross margin for the current and prior periods (A) helps in understanding the profitability from sales, while analyzing sales returns and allowances for proper disclosure (C) ensures that revenue is reported net of these factors, providing a more accurate picture of the revenue earned. Both of these activities are relevant tests for revenue, making D (Both A and C) the correct answer.

A Test for Revenue Is