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When goods are sold on sale or return basis, no accounting entries are made AT ALL in any books ( entity and customer) until a specific event occurs like the customer was able to sell the goods?
A memorandum record will be maintained of the value of the goods despatched and then, when the recipient contacts the entity with an “account sales” entries can be put through to record revenue, receivables, cash and the value of inventory still held by the consignee
Too deep for F7 other than for the purpose of adjusting revenue, receivables and year-end inventory
When the sale is finally made, the goods are accounted for in the year of delivery or in the year of the actual sales?
For eg. The goods were delivered to the customer in November 2015 (with option to return) and the customer sold the goods in February 2016. Y/e for both companies is 31 December.Until notified of the sale, the goods remain the property of the consignor and hence should be included in “our” inventory at cost
On notification of the sale, the sale price will be recorded as a sale as at the date of notification
OK?
If the question tells you that goods on sale or return basis have been included with the value of closing inventory as at year end, how would you tackle this plse?
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