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The term sales in a marketing, advertising or a general business context often refers to a free in which a buyer has agreed to purchase some products at a set time in the future. From an accounting standpoint, sales do not occur until the product is delivered. "Outstanding orders" refers to sales orders that have not been filled.
Purchase price allocation (PPA) is an application of goodwill accounting whereby one company (the acquirer), when purchasing a second company (the target), allocates the purchase price into various assets and liabilities acquired from the transaction.
For example, sales returns and allowance and sales discounts are contra revenues with respect to sales, as the balance of each contra (a debit) is the opposite of sales (a credit). To understand the actual value of sales, one must net the contras against sales, which gives rise to the term net sales (meaning net of the contras). [34]
Net profit measures the profitability of ventures after accounting for all costs. [1] Return on sales (ROS) is net profit as a percentage of sales revenue. ROS is an indicator of profitability and is often used to compare the profitability of companies and industries of differing sizes.
In business accounting, the term "write-off" is used to refer to an investment (such as a purchase of sellable goods) for which a return on the investment is now impossible or unlikely. The item's potential return is thus canceled and removed from ("written off") the business's balance sheet. Common write-offs in retail include spoiled and ...
If it happens, that's usually just bad accounting (a math error), or else a case of fraud. But things are more complicated when we aggregate the accounts of many enterprises, households and government agencies ("institutional units" or transactors in social accounting language). Here, a conceptual problem arises.
In accounting, the revenue recognition principle states that revenues are earned and recognized when they are realized or realizable, no matter when cash is received. It is a cornerstone of accrual accounting together with the matching principle. Together, they determine the accounting period in which revenues and expenses are recognized. [1]
For example, ROMI could be used to determine the incremental value of marketing as it pertains to increased brand awareness, consideration or purchase intent. In this way both the longer-term value of marketing activities (incremental brand awareness, etc.) and the shorter-term revenue and profit can be determined.