The following is a list of problems which an accountant may well meet in practice:

The transfer fee of a footballer.

Goods are sold in one period, but the cash for them is received in a later period.

The proprietor’s personal dwelling house has been used as security for a loan which the bank has granted to the company.

What profit to take in the third year of a five-year construction contract.

Small stocks of stationery held at the accounting year end.

Expenditure incurred in working on the improvement of a new drug.

Required:

State:

(1) which accounting rule the accountant would most probably adopt in dealing with each of the above problems; and

(2) the reasons for your choice.