DESCRIBE ACCOUNTING ISSUES FOR REVENUE RECOGNITION AT POINT OF SALE.

Solutions

Expert Solution

Revenue should be recognized if we satisfy some predetermined conditions at the time of sale upon which revenue is measured and recognized. eg. transfer of the right to use and ownership to other at the time of sale. but the problem arises when some conditions attached to it. which are follows

1) Sales with the right to return: in this case, there is a right with the purchaser to return the goods if it does not fit in with his expectations within the stipulated time. eg, goods sold on Amazon with 15 days return policy.

2) Sales of goods on approval basis: some time goods are sent to the buyer with a clause that he can either keep it or can return it. eg, homogenous goods sent to the dealer in case of or original goods are not in stock on approval basis.

3) Principal-Agent relationship: in this case agent buys and sells on behalf of principle but the actual bills made in the name of original buyer instead of the agent. so when goods are sent to the then revenue is not recognized but when the agent sells that goods than revenue are recognized.

4) Sales with extended payment term: In this case goods are sold to the buyer with an extended payment term than normal at some higher price. this type of transaction is generally made with the buyer having good credit record but have some financial problem at current. the extra price charge is generally in nature of interest for the lag of payment period.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

In Enron's bankruptcy, "Revenue Recognition" was one of the major issues. First, summarize the revenue recognition...

In Enron's bankruptcy, "Revenue Recognition" was one of the major issues. First, summarize the revenue recognition issue in Enron Bankruptcy. Second, as an auditor, what type of evidence would you want to examine to determine whether Enron was inappropriately recording revenue from the Sithe Energies contract?

Describe the basic concept of revenue recognition. What are the issues involved when there are multiple-element...

Describe the basic concept of revenue recognition. What are the issues involved when there are multiple-element sales? What are the required disclosures in regard to revenue recognition.

"Revenue Recognition" The revised revenue recognition accounting standard employs a five-step process to achieve the core...

"Revenue Recognition" The revised revenue recognition accounting standard employs a five-step process to achieve the core principle to recognize income upon the transfer of promised goods or services. Use the Internet or Strayer Library to research a company that bundles a product and a service. Examine income recognition of the bundled product and service for the company by addressing each step in the five-step process for revenue recognition. Give your opinion on the most critical step for accurately reporting revenue...

Does the accounting change in revenue recognition for a new system which requires the recognition of...

Does the accounting change in revenue recognition for a new system which requires the recognition of deferred revenue matter to managers?

what is the revenue recognition principle and expense recognition principle? what is the accrual-basis accounting and...

what is the revenue recognition principle and expense recognition principle? what is the accrual-basis accounting and the cash-basis accounting? Adjusting entries- When and why should adjusting entries be prepared? What are the benefits of the adjusted-trial balance?

which of the following illustrates the recognition of sales tax collected at the point of sale?

25. Revenue recognition is a major accounting challenge. Most industrial and retail firms recognize revenue as...

25. Revenue recognition is a major accounting challenge. Most industrial and retail firms recognize revenue as earned at the point of sale. More generally, according to IAS 18, revenue from the sale of goods should be recognized when the significant risks and rewards of ownership have been transferred to the buyer, the seller loses control over the items, the revenue and related costs can be measured reliably, and collection is reasonably assured. Revenue from services and long-term contracts can be...

Revenue recognition at a point in time or over time Kleymenova Consulting, Inc., enters into a...

Revenue recognition at a point in time or over time Kleymenova Consulting, Inc., enters into a contract to provide consulting services 1. The consulting services are the provision of technical computer assistance as needed. For $25,000 per month, whenever the client has a problem, it contacts Kleymenova, which dispatches a consultant to address the problem at no additional charge. 2. The consulting services are to develop a new customer payment collection system for the client. The $300,000 contract price is...

the financial accounting and internal accounting standards boards created a new, converged revenue recognition standard the...

the financial accounting and internal accounting standards boards created a new, converged revenue recognition standard the was required to be adopted by all public companies by 2017. briefly explain why the standards setters thought this change was warranted

The new revenue recognition standard issue by the Financial Accounting Standards Board (FASB) and International Accounting...

The new revenue recognition standard issue by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) will call for major changes in the way companies in the airline industry recognize revenue. Airlines may have to change how they account for loyalty status benefits, mileage credits, change fees, and breakage for tickets that expire unused. The American Institute of Certified Public Accountants (AICPA) has formed an airlines task force to address implementation issues of the new standard for...

Subjects