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Revenue – recognition – ACCA Financial Reporting (FR)

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  2. Excellent Lecture. Please sir how do we treat the difference between the total stand alone prices and the total consideration received or receivable under the contract?. De we add the difference to the cost of sales in SPL?

  3. Hi Chris Barlow Esq.

    I had a go at the past paper exam question in relation to IRS 15. Derringdo.

    Derringdo sells goods supplied by Gungho. Goods are classed as “A” grade or “B” grade – having slight faults. Derringdo sells A grade goods as an agent for Gungho at a price that gives a gross profit margin of 50%. Derringdo receives a commission of 12.5% on these sales. Derringdo sells B grade goods as a principal at a gross profit margin of 25%. Derringdo provides the following:
    Stock at 1 April of 2400 A grade
    Stock at 1 April of 1000 B grade
    Goods from Gungho year to 31 March 2007 a grade 18,000
    b grade 8,800
    Inventory held 31 March 2007 a grade of 2000 and b grade of 1250.

    My question is what amount of revenue should be recognised in relation to a grade for 31 March 2007.
    The difference in stock in opening and closing is 400 and goods from Gungho grade a being 18,000 as per the question gives me 18,400 but how do we calculate the fraction?

    Kind Regards
    I Shah

  4. Hello Gohar,

    I had a go at the past paper exam question in relation to IRS 15. Derringdo.

    Derringdo sells goods supplied by Gungho. Goods are classed as “A” grade or “B” grade – having slight faults. Derringdo sells A grade goods as an agent for Gungho at a price that gives a gross profit margin of 50%. Derringdo receives a commission of 12.5% on these sales. Derringdo sells B grade goods as a principal at a gross profit margin of 25%. Derringdo provides the following:
    Stock at 1 April of 2400 A grade
    Stock at 1 April of 1000 B grade
    Goods from Gungho year to 31 March 2007 a grade 18,000
    b grade 8,800
    Inventory held 31 March 2007 a grade of 2000 and b grade of 1250.

    My question is what amount of revenue should be recognised in relation to a grade for 31 March 2007.
    The difference in stock in opening and closing is 400 and goods from Gungho grade a being 18,000 as per the question gives me 18,400 but how do we calculate the fraction?

    Kind Regards
    I Shah

  6. Hi Sir,

    I need to understand that the amount of Handset = $360 is which of the set amount because when you divide the voda phone set amount from total amount it naturally gives per unit amount (Handset = (Vodaphone sell amount = 480)/(Vodaphone sell amount+240 call data charges = 720) * (Telephonia sell amount = 540)?

    It is request you to kindly tell how to what is the transaction in Debit / Credit and amounts goes into SOFP & SOPL.

    Thanks!

  7. Hi Gohar,
    I came across a question just like this in a bpp practice (progress) test today and I got it wrong also. The question was almost exactly as above and I took it that I needed to discount for the 2 years.
    I think the issue might be that the question asks what amount to put in P&L at y/e 2005 (which is one year from end of “credit period”), so you discount for 1 year….??

    Maybe there is a better explanation of this that somebody might offer?

    Cheers
    Billy

  8. Can you please help me to understand the following problem from Kaplan Exam Kit N114.

    It says

    On 01 April 2004 Company A sold a car to company B on the following terms:
    Selling price $25,000. B paid $12,650 on 1 April 2004 and would pay the remaining on 31 March 2006 (two years after the sale). Cost pf capital is 10% per annum.

    What is the amount which A should credit to P&L in respect of this transaction in the year ended 31 March 2005.

    I discounted 2nd half of payment for 2 years, but in answer it is discounted for 1 year only.
    Can’t get why just 1 year.

    Thanks in advance

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