BU227 Lecture Notes - Lecture 7: Direct Deposit, Revenue Recognition, Promissory Note
Document Summary
Accounting for sales revenue: recall the revenue principle (see p10). For sellers, the criteria are often met & sales revenue is recorded when title/risks of ownership pass to the buyer. The point when title changes hands is determined by shipping terms in the sales contract. Revenues from goods sold fob (free on board) shipping point are recognized at shipment. Revenues from goods sold fob destination point are recognized at delivery. The seller accepts credit cards for many reasons: 1: avoiding the costs of providing credit directly to customers, for recordkeeping and bad. Sales discounts to businesses sales/cash discount: cash discount offered to encourage prompt payment of an account receivable credit sales on open account don"t have a formal written promissory note indicating amount owed. Both discounts provide good service to customers & promote faster receipt of cash, thus reducing recordkeeping costs and minimizing bad debts.
