When does a sale/transaction take place?

26-10-2011 3:06pm #1

I've always been curious about this:

If I own a retail shop that sells clothes [for example], but instead of someone coming into the shop, the clothes are delivered to his/her house, and payment is taken for them at a later date, when is the sale actually taking place in legal terms?

Is it when the clothes change hands from the seller to the buyer or is it when the seller receives cash for it?

MYSTICA1 · 26-10-2011 3:32pm

I would think that unless the goods are sold on a 'sale or return' basis, then the sale takes place once the order is fulfilled.

26-10-2011 3:37pm

MYSTICA1 wrote: »

I would think that unless the goods are sold on a 'sale or return' basis, then the sale takes place once the order is fulfilled.

One would think that, but can it be considered a sale if no money has changed hands?

MYSTICA1 · 26-10-2011 3:44pm

Of course, Most sales are credit sales, i.e. You have a sale and a debtor and once money is received, debtor turns to cash. But the initial accountancy entry for a credit sale would be credit to sales & debit to debtors.

ssbob · 26-10-2011 3:54pm

It is when the order is fulfilled, in some cases people pay for goods up front but ie. a prepayment(like household bills) but until the service is delivered then the sale cannot be recognised!

26-10-2011 3:59pm

ssbob wrote: »

It is when the order is fulfilled, in some cases people pay for goods up front but ie. a prepayment(like household bills) but until the service is delivered then the sale cannot be recognised!

Is it possible to recognise a sale at an arbitrary time or must the sale be recognised at the time the order was made or fulfilled?

ssbob · 26-10-2011 4:05pm

00011000 wrote: »

Is it possible to recognise a sale at an arbitrary time or must the sale be recognised at the time the order was made or fulfilled?

Well you can print the invoice but for the purposes of year end accounts(or Vat Returns for that matter) you will have to make adjustments for any orders which are not fulfilled at the year end(Month end)........depending on the size of your company this should not be a problem.

When does a sale/transaction take place?

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