Asia Computers Limited is a newly established company in the information technology sector. The company has plans
Asia Computers Limited is a newly established company in the information technology sector. The company has plans to gradually enter BPO and software development activities. In the initial phases, the company plans to concentrate on the following revenue generating activities:
1. Sale of computers: The company buys computers of reputed brands and sells them for personal and office uses. To retail customers, computers are sold on cash basis, whereas commercial customers are given 60 days credit.
2. Maintenance services: The company provides maintenance services for computers either on call basis or by entering annual maintenance contracts with its customers. In the former case, the customer pays every time maintenance service is provided. The cost of spares in such cases is also charged to the customer. In case of AMC, fee is charged yearly in advance. The AMC fee covers the service charges as well as the cost of parts that may have to be replaced.
3. The surplus funds are kept either in fixed deposits with banks or invested in units of mutual funds.
Please help the company is framing suitable accounting policies for revenue recognition for the above mentioned activities.
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