COMMERCE 1BA3 Lecture Notes - Accounting Scandals, Financial Statement, Mci Inc.
26 Feb 2014
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Study objectives: recording sales revenues and related items, accounting for sales discounts, accounting for bad debts, internal controls, bank reconciliations and adjusting entries. Recall the revenue recognition principle: recognize revenues when the following three conditions are met: the earnings process is complete or nearly complete, an exchange transaction takes place, and, collection is reasonably assured. Despite its simple definition, the application of revenue recognition in practice is not that straightforward. In this chapter you will learn about revenue recognition for merchandising firms that do not engage in installment sales. For sales transactions, the earnings process is considered complete when goods are delivered. The determination of when the delivery of goods takes place is subject to the shipping terms. In this chapter we will consider only two common shipping terms: f. o. b. Shipping point: the title of the goods passes from the seller to the buyer as the goods are loaded on the truck or the container at the seller"s location.
