 Bill and hold sales bill and hold sales Sales where the customer agrees to purchase the goods, but the seller retains a physical possession Until the customer requests shipment. So this is another thing that you can kind of imagine happening at the end of the year You can say oh well, what if there's going to be some type of sale that's going to be agreed upon But the the company is holding on to the inventory They don't actually distribute the inventory until after year-end so you can imagine the cutoff date sale happens But the the company is holding on to the inventory not shipping it till after the cutoff date Well, typically the sale should be recognized when the service is done when the work is done when that relates to inventory Goods, that's usually at the point in time that they have been shipped or at the point They have been arrived whether it be FOB shipping or FOB Destination so you can imagine this type of situation invoice goes out accounts receive the bull goes up sales goes up They they say well this they have have purchased that has happened But the inventory hasn't been shipped yet and therefore it's just basically on the books as a sale at that point Even though the transaction hasn't taken place Revenue recognition process so what's going to be the cycle for revenue recognition if we're selling goods So if we sell inventory, we're gonna have purchases We're gonna purchase the inventory that we're then going to mark up and sell and then we're gonna have the inventory We're gonna be tracking the inventory and then of course we'll have cash sales So this is the case if we sell it for cash We would have purchases you can imagine in us holding on to the inventory and then putting it possibly into a store At which point we make sales for cash at the store point and that would be our cycle What if we had sales that we're gonna be made on account? We may have then purchases We're then gonna have the inventory that we're gonna track and then we're gonna have credit sales So now we have a sale we can imagine basically a credit sale a counts receivable sale We didn't get cash at the point in time of the sale We expect to get cash sometime in the future and then of course that's gonna be recording the accounts receivable now being Involved now that we have this accrual process counts receivable and then we're gonna have the cash collection on the accounts receivable So most of the time when we think about basically sales on account. This is the cycle. This is the more complex cycle We would have if we make sales for cash We would have a more simplified cycle looking like this Type of transactions related to the revenue process what kind of transactions are we gonna be looking at? We're gonna have these sales of goods or rendering of services for cash or credit So obviously we're gonna have the sales that will be taking place. These are gonna be the transactions that we'll be testing So when we consider revenue, we will be testing these transactions our focus is on revenue But notice this full transaction that will be happening sales of goods or rendering of services Which will include revenue possibly cash and we'll talk about the accounts involved shortly Receipt of cash from customers in payment for goods or services. We also want to test the receipt of cash from customers for The goods and services and then we're gonna have the return of goods by customers for credit or cash So it's the other thing that could happen that customer could come back and return the transaction So we basically these are the transactions we're concerned with with regard to revenue recognition What are gonna be the accounts then that we will be considering with regard to revenue recognition the revenue process now our main account As is of course revenue, but as we test revenue We're gonna also be testing some of these other type of items to some degree or another Given the fact that we have to as we test revenue Note that that could be a good thing because as we go through this testing process as we go through these accounts We will be testing other types of accounts as we go Which means we can possibly do less testing once we get to those basically accounts and those transactions because we would have already touched on them To some degree as we've been considering the revenue process So then these are going to be the financial statement accounts that will be affected as we consider revenue Then we're also going to be considering these type of accounts because they're involved in the transactions The sales transaction will involve accounts receivable if we make sales on accounts Therefore to some degree as we test the revenue process We will be testing accounts receivable will have sales or revenue because obviously revenue will be involved in the sales transactions Allowance for uncollectible accounts. This is going to be something that will be of involved with accounts receivable as we consider the value of accounts receivable The allowance for doubtful accounts will be part of that net value and then if and then the bad debt expense Representing those receivables that are not going to be collected That's important with regards to the revenue process because really those bad debt expenses are our sales that didn't really happen It's really kind of a negative sale that happened when someone says they're not going to pay us Then the sale never really happened and we have this the bad debt expenses really kind of a negative Sale in that sense. So it's related to the sales transactions cash receipts Transactions related to this revenue process. We're going to be dealing with cash Either with the cash sales or with the receipt from sales on account paying off the accounts receivable So as we test then the sales will also be testing cash So we'll do some testing of cash, of course in that process We will be concentrated on cash in and of itself as we as we test cash at that at some point with testing the bank Reconcilations and whatnot, but as we test revenue We also look at cash to some degree at least on the deposit side of things and then we have the Receivables accounts receivables transaction because it will be going down as we collect cash on account And then we'll have cash discounts as well that we'll have to consider with regards to cash transactions Then we have sales returns and allowance transactions So sales return and allowance and this is going to include the sales returns and the sales Alliances we want to consider these at the same point in time as we consider the revenue process because although these are broken out as Separate type of accounts and they act kind of like expenses They're really contra sales accounts what that means if someone came back and said hey, I'm giving the inventory back now Well, the sale never really happened then it's a it's basically a reversal So we don't usually decrease the sales account recall what we do instead is we make these other accounts with our which are kind of like Contra sales accounts. They're going to be accredited They're going to be debit balance accounts that are basically revenue accounts that are debit balance contra revenue accounts And that's gonna be the sales returns and allowances and then of course the accounts receivable also involved with the sales returns