 be another way that a manager or company might try to manipulate or increase their sales by basically making sales to a related party at terms that aren't arms links, meaning they're not like normal market sales because they're at related party level. And then we have bill and hold sales, bill and hold sales, sales where the customer agrees to purchase the goods but the seller retains 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 gonna be some type of sale that's gonna be agreed upon but the company is holding onto the inventory. They don't actually distribute the inventory until after year end. So you can imagine the cutoff date sale happens but the company is holding onto 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 FLB shipping or FLB destination. So you can imagine this type of situation, invoice goes out, accounts receivable goes up, sales goes up. They say, well, they 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 gonna 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 gonna mark up and sell. Then we're gonna have the inventory, we're gonna be tracking the inventory. Then of course we'll have cash sale. So this is the case if we sell it for cash, we would have purchases, you can imagine us holding onto 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 were gonna be made on account, we may have then purchases, we're then gonna have the inventory that we're gonna track, then we're gonna have credit sales. So now we have a sale we can imagine basically a credit sale, accounts 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, accounts 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 wanna 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 this is the other thing that could happen, the 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 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 gonna be the financial statement accounts that will be affected. As we consider revenue then, we're also gonna 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. We'll have sales or revenue because obviously revenue will be involved in the sales transactions, allowance for uncollectable accounts. This is gonna be something that will be 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 the bad debt expense representing those receivables that are not gonna be collected. That's important with regards to the revenue process because really those bad debt expenses are sales that didn't really happen. It's really kind of a negative sale that happened when someone says they're not gonna pay us then the sale never really happened and we have this bad debt expense is 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 gonna 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 test cash at some point we're testing the bank reconciliation and whatnot but as we test revenue we also look at cash to some degree at least on the deposit side of things. 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 gonna include the sales returns and the sales allowances. We wanna 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 kinda like expenses they're really contra sales accounts. What that means is someone came back and said, hey, I'm giving the inventory back now. Well the sale never really happened then. 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 which are kinda like contra sales accounts they're gonna 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.