Materiality Example 1 In the course of their annual review, the auditors of Mule Ltd discovered that sales invoices for the last week of the year had not been recorded, resulting in an understatement of both sales revenue and accounts receivable of $100 000. In assessing the materiality of this omission, the relevant base amounts and the percentage thereof represented by the error are: For sales revenue: Profit before tax Sales revenue . $ 315 000 2 500 000 Percentage: Percentage: For accounts receivable: . Equity Receivables (current) . $2 153 000 2 050 000 Percentage: Percentage: Tips: In choosing between bases, it is normal to select that which has the largest impact. Conclusion: Cascade Ltd sells goods to Gardener Ltd. Gardener Ltd enters into an agreement to buy the goods from Cascade Ltd for $60 000 on 1 September 2020. Cascade Ltd delivers the goods on 10 September 2020. Gardener Ltd pays for the goods on 30 September 2020. The agreement states that, from the date of delivery, Cascade Ltd must provide maintenance for these goods for the first 12 months. Gardener Ltd is entitled to a refund of 15% of the amount paid if Cascade Ltd does not satisfactorily maintain the goods for the year as required. Required Prepare the journal entries to be recorded by Cascade Ltd as per the recognition criteria in AASB 15/IFRS 15