• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

revenue recognition

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › revenue recognition

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 11, 2014 at 11:29 am #165036
    kerri
    Member
    • Topics: 132
    • Replies: 240
    • ☆☆☆

    Hi

    I do not understand for dec 2011 question ( Venue) part (ii) why they did not discounted the 3m? I would thought that they would discount it to 2.88m and interest expense as been 0.11m.

    Same as the scenario for part (1)

    April 15, 2014 at 8:03 am #165320
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23326
    • ☆☆☆☆☆

    Hi Karen

    The difference in the accounting treatment is a result of the fact that $3m has been received. If we are to debit Cash (as we surely must) with $3m, what do you propose to do with the $3m credit?

    Imagine this in practice. Until the goods are delivered, that $3m already paid is a liability to the customer. IF that $3m were to be put on deposit, it would earn 4% ($120,000). That “income” is really attributable to the customer – it’s his money that was on deposit. Thus we debit interest expense and increase the value of the liability to $3,120,000

    Upon the event of delivery, we eliminate the liability (debit liability $3,120,000) and recognise the revenue including the $120,000 (credit revenue $3,120,000)

    In the earlier part of the question, the cash has not been received so it would only be appropriate to recognise the discounted figure as revenue with the unrolled discount recognised in subsequent years as interest receivable. as each year sees us unroll that discount, the double entry would be debit the receivable and credit finance income until the due date for payment when we can then debit Cash and credit the Receivable

    Is that ok for you?

    April 15, 2014 at 10:12 am #165334
    kerri
    Member
    • Topics: 132
    • Replies: 240
    • ☆☆☆

    So Venue would earn $120,000 income because payment was made and revenue was recognised in a years time when the product was delivered to the customer. Why would this be an interest expense. as I thought it should not give rise to epenses but rather it is income earned?

    Thanks

    April 15, 2014 at 4:32 pm #165358
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23326
    • ☆☆☆☆☆

    It’s an expense because the other side is an increase in the liability (debit? and credit liabilities) When the revenue is eventually recognised at $3,120,000 the $120,000 element will “cancel” the previous year’s expense leaving us with a net revenue recognised at $3m.

    If you borrow someone else’s money and earn interest on it, surely that represents an increase in your liability to the other person and that increase in the liability is matched by the expense.

    Is that ok?

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Accounting for Management – ACCA Management Accounting (MA)
  • Hsaini on Accounting for Management – ACCA Management Accounting (MA)
  • kennedyavege@2023 on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)
  • John Moffat on Relevant Cash Flows for DCF Relevant Costs (example 1) – ACCA Financial Management (FM)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in