Discuss, under the following examples, what the accounting treatment should be and whether Revenue should be recognised or not in the financial statements for the year-end 31 December 2010: (i) On 18 December 2010, DLLA had received ZMK10,000,000 in relation to goods which are due to be shipped on 6 January 2011 to Burundi. At the year-end, the goods are still in the warehouse of DLLA Limited. (ii) On 15 December 2010, DLLA sold goods to a customer amounting to ZMK3,000,000. The customer will pay for these goods on 20 January 2011. The cost of the goods sold was ZMK2,000,000. (iii) On 1 December 2010, DLLA sold goods to a new customer in Zambia. DLLA are trying to break into this market and have done a deal with the new customer whereby the customer has the right to return any unsold goods before 31 March 2011 for a full refund. The amount of the goods sold was ZMK25,000,000. (iv) On 20 December 2010, DLLA sold goods, amounting to ZMK8,000,000 to a customer who normally gets 30 days credit. The goods were ready for delivery to the customer on that date but the customer did not want delivery of the goods until 4 January 2011 as he was going on holidays over the Christmas period. The customer has accepted an invoice for the goods dated 20 December 2010. The customer paid for the goods on 5 January 2011.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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c)Discuss, under the following examples, what the accounting treatment should be and whether Revenue should be recognised or not in the financial statements for the year-end 31 December 2010: (i) On 18 December 2010, DLLA had received ZMK10,000,000 in relation to goods which are due to be shipped on 6 January 2011 to Burundi. At the year-end, the goods are still in the warehouse of DLLA Limited. (ii) On 15 December 2010, DLLA sold goods to a customer amounting to ZMK3,000,000. The customer will pay for these goods on 20 January 2011. The cost of the goods sold was ZMK2,000,000. (iii) On 1 December 2010, DLLA sold goods to a new customer in Zambia. DLLA are trying to break into this market and have done a deal with the new customer whereby the customer has the right to return any unsold goods before 31 March 2011 for a full refund. The amount of the goods sold was ZMK25,000,000. (iv) On 20 December 2010, DLLA sold goods, amounting to ZMK8,000,000 to a customer who normally gets 30 days credit. The goods were ready for delivery to the customer on that date but the customer did not want delivery of the goods until 4 January 2011 as he was going on holidays over the Christmas period. The customer has accepted an invoice for the goods dated 20 December 2010. The customer paid for the goods on 5 January 2011.

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