Chapter 3 Study Guide - Chapter 3 Study Guide Revenue,...

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Chapter 3 Study Guide Revenue, Expenditure, and conversion processes: Revenue process : consists of a series of interrelated activities designed to generate revenue and involves an interaction between company and customer. Depends on how the company obtains orders, the customer-credit policies estab- lished, and the customer support provided. Goals of the Revenue Process: 1. Provide customers with the service wanted at the price they’re willing to pay. 2. Receive payments from customers in a timely fashion. 3. Provide customer support to ensure future sales. The primary activities of the revenue process: Determine marketing and distribution channels to generate sales. How the product can be marketed and distributed. What sales calls were made, where, when, and by whom? Receive and accept orders for goods and services Whether or not a customer should be granted credit is taken into account What did the customer order and at what price? Are the goods available for the customer? Deliver goods and/or services What goods were shipped and how were they shipped? Are the goods on back-order? Receive payment from customers How much sales revenue was generated? How much money was received? Is the account uncollectible? Provide customer support What was returned and why? Did we give a price discount and why? What additional services were required and at what cost? FOB Destination and FOB shipping point: FOB destination: free on board destination, meaning the legal title of the product does not pass until the customer receives the goods. Implies that seller of goods pays for freight charges. If goods are sold FOB destination at the end of the fiscal year, then the sale is not included in determining the seller’s current year’s income because the transaction is not complete until the customer has the title for the goods. FOB shipping: free on board shipping point, meaning the goods legally belong to the customer when they are picked up by the common carrier because that is the point at which legal title transfers. This means the customer is responsible for freight charges, though shipping charges are commonly negotiated between buyers and sellers.
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If goods are sold FOB shipping point at the end of the accounting period, the seller adds the sale to the current year’s income and excludes the inventory from the bal- ance sheet. The Expenditure Process: consists of a series of interrelated activities designed to en- able the company to generate revenues and involves interaction between a company and its suppliers. Goals of the expenditure process:
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This note was uploaded on 03/18/2011 for the course ACCT 2101 taught by Professor Clark during the Fall '10 term at Georgia State University, Atlanta.

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Chapter 3 Study Guide - Chapter 3 Study Guide Revenue,...

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