Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Sale or return
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- February 29, 2016 at 12:03 pm #302611
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?February 29, 2016 at 9:01 pm #302680That sounds good to me, yes
February 29, 2016 at 9:02 pm #302681And 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 discountFebruary 29, 2016 at 9:17 pm #302687Adjust revenue? No
Unwinding discount? Yes. But the unwound discount will be shown as finance income, not revenue
February 29, 2016 at 9:19 pm #302690Oh okay. And we will correspondingly increase the trade receivables by the unwound discount right?
February 29, 2016 at 9:21 pm #302692Correct.
February 29, 2016 at 9:22 pm #302693Alrightt. Thank you.
February 29, 2016 at 9:32 pm #302701You’re welcome
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