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Tags
#cfa-level-1 #reading-25-understanding-income-statement #revenue-recognition
Question
As internet-based merchandising companies developed, many sold products that they had never held in inventory; they simply arranged for the supplier to ship the products directly to the end customer.

What is the issue that came up with this?
Answer
Gross vs Net reporting

Tags
#cfa-level-1 #reading-25-understanding-income-statement #revenue-recognition
Question
As internet-based merchandising companies developed, many sold products that they had never held in inventory; they simply arranged for the supplier to ship the products directly to the end customer.

What is the issue that came up with this?
Answer
?

Tags
#cfa-level-1 #reading-25-understanding-income-statement #revenue-recognition
Question
As internet-based merchandising companies developed, many sold products that they had never held in inventory; they simply arranged for the supplier to ship the products directly to the end customer.

What is the issue that came up with this?
Answer
Gross vs Net reporting
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3.2.4. Gross versus Net Reporting
Merchandising companies typically sell products that they purchased from a supplier. In accounting for their sales, the company records the amount of the sale proceeds as sales revenue and their cost of the products as the cost of goods sold. <span>As internet-based merchandising companies developed, many sold products that they had never held in inventory; they simply arranged for the supplier to ship the products directly to the end customer. In effect, many such companies were agents of the supplier company, and the net difference between their sales proceeds and their costs was equivalent to a sales commission. What amount

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