In construction industry and service industry (that involved installation service), there are instances that goods are delivered to customer, while billings have not been done. Can the Company, who delivered the goods, recognize revenue upon deliveries of the goods? Can the Company recognize revenue even if the installation services have not been done?
It depends on the term of the contract. In industry norm, the deliveries of goods to client’s location do not constitute a probable ground to recognize revenue.
Then, how should we record the goods delivered to client’s location?
The answer is: the items delivered are stocks in nature. As such, it should be recorded as part of the inventory recorded in the Company’s balance sheet.