interview questions shared by candidates
You sell a product for $1,000 in october. You recieve $500 in october and $500 in november. How do you recognize the sale?
Warning: this is a very detailed answer- you will not be expected to provide this level of detail- you just need to know to recognize half in october and half in november October: Debit-Cash-$500 Debit- Accounts Recievable- $500 Credit-Revenue- $1,000 November: Debit-Cash:$500 Credit- Account Recievable- $500
I think $1000 should be recognised even before any cash is received based on the acrual concept of accounting. If u recognise income based on cash receipt then thats a cash basis which is not allowed under GAAP.
When you sell the product you debit A/R $1000 and credit Sales $1000 in October. When you receive payment in Octover you debit cash $500 and credit A/R $550, then when you collect $500 in Nov Debit Cash and Credit A/R $500 each.