Accounting - the principle of auditing I need to know how you get the answer, pl
ID: 2337922 • Letter: A
Question
Accounting - the principle of auditing
I need to know how you get the answer, please.
1) explain when revenue was earned in each of the following independent situations:
a. on a February 28, a farmer went to local seed supply store and ordered 600 Kg of seed and promises to pay.
on March 2, the framer was informed that the seeds have arrived at the seed store. on the same day, the farmer went
to the store, paid for the seed and took it home with him.
When should the seed store recognize revenue from the sale of seed in its books?
what is the point of sale? explain why?
b. On June 20, 2015, a student sent a $200 deposit to University College London(UCL)
ti make sure he will have a place in the college for the year starting fall 2015. the (UCL)
has a fiscal year ( financial year) ending June 30. The student enrolled at UCL on August
15, 2015. when should UCLrecognize the $200 as revenue received from the student?
What is the point of sale? Explain Why?
Explanation / Answer
a.
Revenue is recognised when the title to ownership is given to the farmer i.e. March 2.
Point of sale is Local Seed Supply Store where the seeds were ordered.
Reason - Revenue is recognised when ownership title is transferred. A point of sale is the place where payment is made for goods/services availed and sales tax becomes due irrespective of the type of payment and place i.e. through website or physical store.
b.
The revenue should be recognised when the student finally gets the ownership of service i.e on August 15.
Point of sale in this case should be UCL website if he applied online or the premises where he himself visited to get himself enrolled.
Reason - Revenue is recognised when ownership title is transferred. A point of sale is the place where payment is made for goods/services availed and sales tax becomes due irrespective of the type of payment and place i.e. through website or physical store
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