Western Governors University (WGU) ACCT3340 D215 Auditing Practice Exam

Image Description

Question: 1 / 400

What defines bill-and-hold transactions in accounting?

Goods are shipped before billing

Customers are billed for goods that are not shipped

Bill-and-hold transactions are characterized by the billing of customers for goods that are not physically transferred to them at the time of billing. This occurs when a seller recognizes revenue from a sale even though the buyer has not yet received the goods. For a transaction to qualify as a legitimate bill-and-hold arrangement, specific criteria must be met: the goods must be clearly identified as belonging to the buyer, the buyer must have requested the arrangement, and the seller must have a finite timeframe for shipping the goods.

This contrasts with situations where goods are shipped before billing, which does not align with what constitutes a bill-and-hold arrangement. Likewise, customer cancellations or indefinite storage of goods do not accurately describe the essence of this type of transaction, as they imply a failure in the sales process rather than the proper recognition of revenue under specific circumstances.

Get further explanation with Examzify DeepDiveBeta

Customers cancel orders after billing

Goods are kept in inventory indefinitely

Next Question

Report this question

Download Western Governors University (WGU) ACCT3340 D215 Auditing Practice Exam PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy