Which of the following statements is correct? Revenue is recognized at the time of shipment when goods are shipped FOB destination. Sales returns and allowances are reported as operating expenses on an income statement. A seller records revenue when title and risks of ownership transfer to the buyer. Sales discounts are reported as cost of sales on an income statement.

The buyers, as well as sellers, must negotiate an understanding as to who is capable of paying certain transport costs and also who, whenever the item is delivered, assumes the default risk throughout transportation.
A seller reports compensation whenever the purchaser has the transition of titles as well as ownership uncertainties.

The other three options are not related to a certain scenario. So that option C is the right answer.

Baraq Baraq · Answer 2 · 2021-12-30T11:40:07+01:00

Considering the available options, the correct statement is "A seller records revenue when title and risks of ownership transfer to the buyer."

Under the accounting principles, a seller can choose to record revenue in as much the sales have been made regardless of whether payment has been made or not.

In a business transaction, a sale has been made when the title and risks of ownership transfer to the buyer.

Hence, in this case, it is concluded that the correct answer is option C. "A seller records revenue when title and risks of ownership transfer to the buyer."

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