Revenue recognition

This topic has 3 replies, 2 voices, and was last updated 3 years ago by Kim Smith.

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February 11, 2019 at 2:43 pm #504764
alikhakar
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For audit procedures for revenue, there is a pint “inspect credit notes issued after the year end, trace to GDN and sales invoice and make sure that sale has been reversed:occurence”. In this point..is it so that the sales returns which took place after the year end ..which were included in revenue in FS for the year end..will be removed from revenue?
February 11, 2019 at 5:09 pm #504800
Kim Smith
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Yes – a company could inflate revenue by sending out goods immediately before the year, which the customer returns immediately after the year end.
Note that as well as reversing the sale (and trade receivable), the goods returned would have to be included in the valuation of year-end inventory (otherwise cost of goods would be overstated).
February 12, 2019 at 1:18 pm #504892
alikhakar
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Ok sir ..but what about sales return taking place after the financial statements have been issued ..? Are they adjusted ? Or its just about those sales which are returned immediately after the year end..?
February 18, 2019 at 11:12 am #505599
Kim Smith
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My apologies – I did not see this additional post. By the time the financial statements are issued it should be apparent if there has been any window-dressing of the y/e position. For example, the customer would presumably not pay for goods it didn’t genuinely want.
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