Summary Of Bespoke Inc.
9.0 Accounting treatment for the rendering of services and sale of goods
9.1 Sale of Goods
Wüstemann, J (2005) investigated that, in the situation of selling goods and providing services, the revenue can be recognized after meeting all of these conditions. First, the risk and reward of ownership have been transferred to the buyer. Second, the seller has no effective control on the goods sold. Third, the amount of revenue can be measured reliably. Fourth, the economic benefit associated with the transaction will be transferred to the seller. Fifth, the cost incurred and the cost to be incurred can be measured reliably. Furthermore, the revenue can be recognized only when the goods are sold but not earlier than that.
In contrast, Wüstemann, …show more content…
(2010) Bespoke Inc. has manufactured a machine specifically to the design of its customer. The machine could not be used by any other party. Bespoke Inc. has never manufactured this type of machine before and expects a number of faults to materialize in its operation during its first year of use, which Bespoke Inc. is contractually bound to rectify at no further cost to the customer. The nature of these faults could well be significant. As of Bespoke Inc.’s year-end, the machine had been delivered and installed, the customer invoiced for $100,000 (the contract price), and the costs incurred by Bespoke Inc. up to that date amounted to …show more content…
For this case, it would require looking at the shipping or delivery terms. For example, when the selling goods are free on board, the revenue will be recognized at the time were the goods are shipped. Moreover, the term of CIF which is Cartage, Insurance, Freight, the revenue can be recognized only when the goods are arrived to the buyer. In addition, Ex-Work (EXW) in this term the revenue will be recognized when the goods will be taken from the premises of the seller. Furthermore, Delivered Ex ship (DES) is a term where the revenue will be recognized when the goods arrive at the port of
9.1 Sale of Goods
Wüstemann, J (2005) investigated that, in the situation of selling goods and providing services, the revenue can be recognized after meeting all of these conditions. First, the risk and reward of ownership have been transferred to the buyer. Second, the seller has no effective control on the goods sold. Third, the amount of revenue can be measured reliably. Fourth, the economic benefit associated with the transaction will be transferred to the seller. Fifth, the cost incurred and the cost to be incurred can be measured reliably. Furthermore, the revenue can be recognized only when the goods are sold but not earlier than that.
In contrast, Wüstemann, …show more content…
(2010) Bespoke Inc. has manufactured a machine specifically to the design of its customer. The machine could not be used by any other party. Bespoke Inc. has never manufactured this type of machine before and expects a number of faults to materialize in its operation during its first year of use, which Bespoke Inc. is contractually bound to rectify at no further cost to the customer. The nature of these faults could well be significant. As of Bespoke Inc.’s year-end, the machine had been delivered and installed, the customer invoiced for $100,000 (the contract price), and the costs incurred by Bespoke Inc. up to that date amounted to …show more content…
For this case, it would require looking at the shipping or delivery terms. For example, when the selling goods are free on board, the revenue will be recognized at the time were the goods are shipped. Moreover, the term of CIF which is Cartage, Insurance, Freight, the revenue can be recognized only when the goods are arrived to the buyer. In addition, Ex-Work (EXW) in this term the revenue will be recognized when the goods will be taken from the premises of the seller. Furthermore, Delivered Ex ship (DES) is a term where the revenue will be recognized when the goods arrive at the port of