The figures in the trial balance include $5 million of goods made on a sale or return basis, where customers still have the right to return the goods. Cole makes a margin of 40% on these sales.
Sir I just want to check if the my.workings are right for this. We will reduce Revenue and Trade receivables by $5m and increase inventory by $3m, right?
Ask the Tutor ACCA FR
Sale or return
10y ago#1That sounds good to me, yes
And two more things. I read somewhere that there are sometimes circumstances of constructive obligation to refund customers with a particular amount and we should create a provision on the expected value of refund. So for this do we need to adjust anything else like revenue.
And there are sometimes sales where amount will be received after 2 to 3 years and we need to adjust the amount for revenue(discount it) but will there any further accounting for that? Like unwinding of discount
10y ago#3Adjust revenue? No
Unwinding discount? Yes. But the unwound discount will be shown as finance income, not revenue
Oh okay. And we will correspondingly increase the trade receivables by the unwound discount right?
10y ago#5Correct.
Alrightt. Thank you.
10y ago#7You're welcome
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