Question

A customer asks the owner of a store to save an item for him and says that he will pick it up and pay for it next week. The owner agrees to hold it. Should this transaction be recorded as a sale? What effect it would have on the financial statements?

Answer 1

No this transaction not recorded as a sale because as per principal of revenue Before revenue is recognized, the following criteria must be met: persuasive evidence of an arrangement must exist; delivery must have occurred or services been rendered; the seller's price to the buyer must be fixed or determinable; and collectability should be reasonably assured.In the above service have not been rendered to customer and no price are fixed. It's doesn't meet criteria for revenue recognition. It's no effect on financial statements.