08 September 2010
M/s. ABC prepared a invoice in favour of Foreign buyer on 27th March 2010. goods were transported to port for the delivery. The goods were shipped on 2nd April 2010 and Bill of lading was prepared on 2nd April 2010. What would be the effective date of sale?
A key criterion for determining when to recognise revenue from a transaction involving the sale of goods is that the seller has transferred the property in the goods to the buyer for a consideration. The transfer of property in goods, in most cases, results in or coincides with the transfer of significant risks and rewards of ownership to the buyer. However, there may be situations where transfer of property in goods does not coincide with the transfer of significant risks and rewards of ownership. Revenue in such situations is recognised at the time of transfer of significant risks and rewards of ownership to the buyer. Such cases may arise where delivery has been delayed through the fault of either the buyer or the seller and the goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault. Further, sometimes the parties may agree that the risk will pass at a time different from the time when ownership passes. SO if by raising invoice the ownership has passed on to the buyer,the effective date of sale will be 27.03.2010.
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