Question

Instituting a policy whereby customers can now purchase merchandise on account, when in the past only cash sales were accepted, is evidence that a change in accounting principle has occurred. True or False?

Answer 1

The statement in the question is true. Instituting a policy whereby customers can now purchase merchandise on account, when in the past only cash sales were accepted, is evidence that a change in accounting principle has occurred.

Step-by-step explanation:

The statement in the question is true. Instituting a policy whereby customers can now purchase merchandise on account, when in the past only cash sales were accepted, is indeed evidence that a change in accounting principle has occurred. In the past, the company only recognized revenue when cash was received from customers. However, with the introduction of allowing customers to buy on account, revenue will now be recognized when the merchandise is sold, even if the cash hasn't been received yet. This change in the timing of revenue recognition is a change in accounting principle.