I am a bit of confused about adjustments for revenue shouldn’t be recognized. I know it should be deducted from revenue and added back to inventory (- profit) but what happens with COS? thanks
If it is for example sale on return basis before the year end, you need
to decrease revenue for sales amount in I/S
to decrease COS for amount of inventory sold under this agreement in I/S
to increase inventory in SOFP for amount of inventory sold
if this sale haven’t been paid for, entity should eliminate trade receivables for sales amount in SOFP
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