Question: The following is an excerpt from a conversation between Sonia

The following is an excerpt from a conversation between Sonia Lopez and Pete Lemke just before they boarded a flight to Paris on Delta Air Lines. They are going to Paris to attend their company's annual sales conference.
Sonia: Pete, aren't you taking an introductory accounting course at college?
Pete: Yes, I decided it's about time I learned something about accounting. You know, our annual bonuses are based on the sales figures that come from the accounting department.
Sonia: I guess I never really thought about it.
Pete: You should think about it! Last year, I placed a $5,000,000 order on December 30. But when I got my bonus, the $5,000,000 sale wasn't included. They said it hadn't been shipped until January 9, so it would have to count in next year's bonus.
Sonia: A real bummer!
Pete: Right! I was counting on that bonus including the $5,000,000 sale.
Sonia: Did you complain?
Pete: Yes, but it didn't do any good. Julie, the head accountant, said something about matching revenues and expenses. Also, something about not recording revenues until the sale is final. I figure I'd take the accounting course and find out whether she's just messing with me.
Sonia: I never really thought about it. When do you think Delta Air Lines will record its revenues from this flight?
Pete: Hmmm . . . I guess it could record the revenue when it sells the ticket . . . or . . . when the boarding passes are scanned at the door . . . or . . . when we get off the plane . . . or when our company pays for the tickets . . . or . . . I don't know. I'll ask my accounting instructor.
Discuss when Delta Air Lines should recognize the revenue from ticket sales to properly match revenues and expenses.

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  • CreatedFebruary 28, 2014
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