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Reply from PSD Rajan on Jan 9 at 8:50 PM The entries are based on Revenue Recognition and Matching (cost and
revenue) Principles and are dictated by accounting principles.
| | | ---------------Original Message---------------
From: Vidhya Dhar
Sent: Monday, January 09, 2012 8:41 PM
Subject: Revenue and COGS Cancellation and Reposting for Revenue Recognition Contracts
Hi Amy
Though your solution is correct from the double entry point I am not sure
if it is acceptable by statute(s) prevailing in any country.
Are you suggesting?
1. Customer Debit and Revenue Credit along with ( Goods
in transit Debit and Stock Credit ) as the first step.
and
2. COGS Debit and Goods in transit Credit as the second step?
Wouldn't it hamper profit determination?
The first entry inflates profit ( since Goods in transit is a balance
sheet item ) without related cost.
The second entry inflates COGS without reference to Revenue element and
deflates profit .
What if step 1 happens during year end close and step 2 in the beginning of
the next fiscal year ?
Is that acceptable accounting norm? Does that not violate the matching
principle? I wonder !
Regards
VidhyaDhar |
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