Shandy started two businesses, Shandy Bakery and ShandyAdvertising in 2019. Shandy closes the accounts on 31 December annually. She engaged an accounting firm to prepare the audited financial statements for her businesses. The accountant discovered that some of the recorded transactions did not comply with the accounting principles. The accountant found out that Shandy has mixed up the general expenses for Shandy Bakery and Shandy Advertising. Besides that, the electricity and water expenses for December 2020 were not recorded during the period. The expenses were recorded in January 2021 when the payment is made. To reflect a higher profit, Shandy reported a recent potential contract from China worth RM 148,000 as its revenue. Both parties had agreed on the terms, but they had yet to sign the deal. During her business trips to China, Shandy used the companys credit card to purchase gifts for her friends, staff, and family members. She posted these expenses as the companys expenses. The accountant found out that Shandy recorded credit purchases based on receipts issued by the supplier upon payment. They discovered that the company had not posted invoices from suppliers even though the suppliers had already rendered their services.

Moreover, the accounting firm came across irregularity in recognizing the revenue from their overseas clients. Ji Han used exchange rates from different sources to convert the revenue in foreign currency to local currency. She chose the exchange rate that will report higher revenue. Based on the scenario above, state the accounting concepts or assumptions that has been violated and explain the correct procedure that should be used.