Below is an essay on "Accounting Principles Followed In Tyre Industry" from Anti Essays, your source for research papers, essays, and term paper examples.
Accounting Principles followed in Tyre Industry (Roll no. 6 - 10)
1. Revenue Recognition
Sale of goods and services are recognised when risks and rewards of ownership are passed on to the customers which generally coincides with delivery and when the services are rendered. Sales include Excise Duty but exclude VAT and warranty claims.
Revenue is recognized when the significant risks and rewards of ownership of goods have been passed to the buyer. Gross sales are inclusive of excise duty and are net of trade discounts/sales returns/VAT. Dividend income on investments is accounted for when the right to receive the payment is established. Interest Income is recognized on time proportion basis.
Revenue recognition is done when the significant risks and rewards of ownership of goods have been passed to the buyer. Sales include Excise Duty and are net of VAT/discounts/sales return.
Revenue Recognition Comparison & Analysis
It can be seen that revenue recognition is exactly the same across the three tyre companies. The revenue is recognised when the risks and the benefits associated with the ownership are passed on to the buyer. In tyre industry it usually happens with delivery and when the services are rendered to the buyer. Interest income is recognised on time proportion basis and dividend income is recognised only when the right to receive the payment is established. Thus, the companies use Completed service contract method of revenue recognition.
Inventories consisting of stores & spares, raw materials, work-in-progress and finished goods are valued at lower of cost and net realisable value. Cost of Goods Sold: The cost for raw materials, work-in-progress and finished goods is calculated on FIFO basis. WIP and finished goods inventories include labour cost and other related overheads. The cost of stores and spares is computed on Weighted Average Cost basis....
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