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4: Revenue - Coggle Diagram
4: Revenue
Variable consideration
Using past experience this is $197,000(20,000 sold -300 returned)x$10sp
This estimate can be included in transaction price because it is highly probable that a significant reversal in revenue will not occur once the returns take place
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Seller has received payment for all goods, so it should recognise a refund liability of $3,000 (300 units x $10 sp) for the units that will be returned.
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An asset of $1,200 (300 units x $4 cost) should be recognised as this represents seller's right to the products once the customer returns them.
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Dr Right to recover products $1.2k CR Inventories (20,000 x $4) & DR COS (19,700 x $4)
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DEFINITION: Income arising in the course of an entity's ordinary activities (sale of goods, rendering of services, receipt of royalties)