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what is the accounting treatment if the firm sell a meal @ ₹500 and cost price of meal is ₹400 one of there customer buy meal and after eating he asked to refills a meal and cafe refill it so how it is treated ?
That's good costing technique. What do you follow? Everyone follows absorbed costs. Because of your only guy asking for a refill it's a loss. If all employees refill once in a while, everything is absorbed.
Coming to think of it even marginal cost will do the same. Refill is not a variable cost here nor a fixed cost. So on a trial and error your manager will how much anyone eats.
Not a grrat treatment. Its purely maths and how the discount is allocated. This is not a complex scenario in customer optiins in revenue recognition and promotuinal. I have refresh manythings treatments in standards and promise to get back to you tomorrow. Because i have ready treatments for discounts, unwinding discounts and free additiinal goods transferred under revenue recognition. Your talking about extra food and i have to be prudent in treating it. Usually its trial and error or adjusted market assessment because the restaurant people already know their profits and apetitite of average customers. See ya tomorrow
Now in my view i thibj the accounting treatment for refills is not explained. But ee can imagine it.
1 free refill cost will be allcated to the transaction price 500
If 10 meals sold and one cuatomer did not ask for a refill, it can be treated as addriinal gain.
Iys hard to measure like this but since food is perishable, write off the one refill from inventory.
This has to be the daily practice. So treat it as a gain if you can measure it or write it off from inventory. But this is not a loss to you as it is covered in transaction price.
Some people can gather all leftover refills and sell it as a mew meal recognise it as revenue. Its wrong to report gsin as revenue
It cannot be a loss because you have charged for it. If refilling is free, it can be a loss depending on if the company wants to charge it on customers indirectly or not
You didn’t get my question
my question is suppose a cafe sells a fries @ rs 100 and the customer buy it and ask to refill it and the cafe refill it for free without charging extra for it ? so what is the accounting treatment of itIf the company gives free refill willingly to promote its business, this is an expense because loss is tax exempt.
If the company is forced to give a free refill then it is a loss because matters are beyond management
cost to company 400
sold for 500
realised profit is 100 and in this 50 worth of refill. If someone deosnt take a refill, it will reused for another meal. under these circumstances I believe a gain must be recorded along with revenue
Dr. Cash 500
Cr Revenue 450
Cr Gain on refill 50
Then write off inventory
Dr. write off expense or/reserves 50
Cr. Inventory 50
So this gain and write off will offset. What do you think is best here?
Then when you offer it for free
Dr. cash 450
Dr. Refill/promotional expense 50
Cr. Revenue 450
Cr. Cash 50
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