Case 3.6 Revenue Recognition
3.6 Revenue recognition with examples when goods are sold under sale or return
There are cases when payments are received prior to events that trigger revenue recognition. In that case, cash is debited and the unearned revenue is credited. On the other hand, when revenue recognition is triggered before actual payment is received, accounts receivable is debited while revenue is credited (“Revenue Recognition Principle,” 2013). Goods are sold under sale or return when they are “sent by the supplier to the customer” with an agreement that the customer is not required to pay until the goods are actually “used or sold by the customer.” If the goods are not yet sold or used by the customer, the customer can return the goods to the supplier. The
There are cases when payments are received prior to events that trigger revenue recognition. In that case, cash is debited and the unearned revenue is credited. On the other hand, when revenue recognition is triggered before actual payment is received, accounts receivable is debited while revenue is credited (“Revenue Recognition Principle,” 2013). Goods are sold under sale or return when they are “sent by the supplier to the customer” with an agreement that the customer is not required to pay until the goods are actually “used or sold by the customer.” If the goods are not yet sold or used by the customer, the customer can return the goods to the supplier. The