ACCT1501 - Perdisco (1 Viewer)

[Tortilla]

Doing the online set currently.

One of the events are as follows:

- Received a purchase order from XXX. Created a corresponding sales order to deliver x MePod Multimedia players to this customer for $a each. Invoice number 256.

The following week:

- Delivered x MePod players to XXX for $'a'each. Invoice No. CCC. These items were ordered on the abth.

Ok, im up to the 1st transaction, am i correct in saying that this event is not an accounting transaction. The instructions state "revenue is only recognised when goods are delivered". I.e. do i totally ignore this transaction or does this have an effect on the inventory cards?

 

[Shadowdude]

You have to look at the beginning of the Perdisco set where you get an overview of the accounting procedures of that firm. So there's no cut and dry answer because it depends.

 

[4025808]

Doing the online set currently.

One of the events are as follows:

- Received a purchase order from Pikea. Created a corresponding sales order to deliver 25 MePod Multimedia players to this customer for $1950 each. Invoice number 256.

The following week:

- Delivered 25 MePod players to Pikea for $1950 each. Invoice No. 256. These items were ordered on the 19th.

Ok, im up to the 1st transaction, am i correct in saying that this event is not an accounting transaction. The instructions state "revenue is only recognised when goods are delivered". I.e. do i totally ignore this transaction or does this have an effect on the inventory cards?

It's not an accounting transaction because there has been no revenue, expense or anything delivered yet. But a week later it IS recognized as a transaction as the goods have been delivered

 

[Trans4M]

It's not an accounting transaction because there has been no revenue, expense or anything delivered yet. But a week later it IS recognized as a transaction as the goods have been delivered

In 1B you will learn that it can be a transaction as different firms recognise revenue at different points.

However for the purpose of 1A yes you are correct.

 

[seremify007]

In 1B you will learn that it can be a transaction as different firms recognise revenue at different points.

However for the purpose of 1A yes you are correct.

That's true (that different firms can have accounting policy choices to recognise revenue at different points in time) but given the information above, I can't think of any potential interpretation of 118 which would facilitate the recognition of revenue for the sale of goods at the creation of a sales order. Particular reference to para 14(a) would indicate the significant risk/rewards have not been transferred. The only times you can potentially recognise revenue at sales order stage which I can think of would be a situation where it's a contract for the provision of some kind of subscription service for an unlimited period of time (i.e. it's not an annual subscription for example) which has no right or recourse to refund nor any commitment by the seller to deliver any particular number or quantity of units (i.e. it's not possible to use WIP or percentage of completion to measure).

Note that of course this is subject to materiality.