ACTG 4200 Lecture Notes - Lecture 1: Credit Risk, Financial Statement
Document Summary
Important thing about case writing: how you rank issues. Explain the rule: revenue only record the benefits that come into us, ownership rights etc. Revenue on these types of contracts are recorded on gross or net basis. Only record gross when: when we have flexibility in setting a prices, when we bear the inventory risk. People are using the horses and get daily access to riding but ponyup only keep service fee. This is an issue about gross vs net accounting. Ponyup does not have the primary responsibility for providing the horse for riding, it is at the owner"s discretion. No inventory risk as the horses don"t belong to ponyup. Fee that ponyup earns is fixed per transaction. Im a buyer youre seller, the selling price is based on net income. As a buyer i don"t want to pay too much. The most important user who"s going to be using the financial statement.
