ogoluwa

It is also mentioned in the example that the rest of the payment will be received over 10 year period, so you would do the same procedure (profit/total sales = 45% ; profit to recognize = ($cash received)*45% to each payment received over time.

It is basically based on applying pre-determined profit margin % to each payment received, recognizing the profit and cost of goods sold portions over time.



Edited 2 time(s). Last edit at Tuesday, March 29, 2011 at 10:42AM by sdeni.