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  • In This Chapter You Learned The Three Conditions That Must

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    Miroslav Gegoski
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    The document discusses the three conditions for revenue recognition that were learned in a chapter: that a sale must be processed and payment authorized before revenue can be recorded. It provides an example of a shoe store clerk entering sales transactions into a cash register, with revenues only recorded once payment is approved. The clerk is incentivized to overstate revenues due to commission payments, but the store prevents this by preprogramming prices and requiring payment authorization for a sale to be recorded.

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    In This Chapter You Learned the Three Conditions That Must

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    In This Chapter You Learned the Three Conditions That Must

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    The document discusses the three conditions for revenue recognition that were learned in a chapter: that a sale must be processed and payment authorized before revenue can be recorded. It provides an example of a shoe store clerk entering sales transactions into a cash register, with revenues only recorded once payment is approved. The clerk is incentivized to overstate revenues due to commission payments, but the store prevents this by preprogramming prices and requiring payment authorization for a sale to be recorded.

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    © All Rights Reserved
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    2 views1 page

    In This Chapter You Learned The Three Conditions That Must

    Uploaded by

    Miroslav Gegoski
    The document discusses the three conditions for revenue recognition that were learned in a chapter: that a sale must be processed and payment authorized before revenue can be recorded. It provides an example of a shoe store clerk entering sales transactions into a cash register, with revenues only recorded once payment is approved. The clerk is incentivized to overstate revenues due to commission payments, but the store prevents this by preprogramming prices and requiring payment authorization for a sale to be recorded.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    In this chapter you learned the three conditions that must

    #8543
    In this chapter, you learned the three conditions that must be met before revenue can be
    recognized. In any organization, there is always a risk that fictitious revenue may be recorded
    before it is earned.Assume that you are a sales clerk in a shoe store. Your job is to sell products
    to prospective customers; once they are sold, you enter the transaction in the cash register. The
    selling price of all shoes to be sold is preprogrammed in the register by head office. The
    transactions recorded in the cash register provide the basis on which revenue is recorded in the
    accounting records. A sale is not processed and recorded until payment (whether by cash, debit
    card, or credit card) is appropriately authorized. You are paid a weekly salary and a percentage
    commission based on the sales that you have personally made.Instructions(a) When does the
    shoe store record revenue? How is each condition of revenue recognition met before revenue is
    recorded?(b) What would be your incentive to overstate the recording of revenues?(c) How is
    the shoe store preventing you from overstating revenues?View Solution:
    In this chapter you learned the three conditions that must

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