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Incoterms
Do you know that what is Incoterms? How it impact the recognition of revenue/purchase in the Company? This article is important to an accountant and auditor.
First of all, Incoterms are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts. They are published by the International Chamber of Commerce (ICC) and are widely used in commercial transactions.
Shippers worldwide use standard trade definitions (called Incoterms) to spell out who’s responsible for the shipping, insurance, and tariffs on an item; they’re commonly used in international contracts and are protected by International Chamber of Commerce copyright. It significantly reduce misunderstandings among traders and thereby minimize trade disputes and litigation. Familiarize yourself with Incoterms so you can clearly define who is responsible for which charges.
Here is the illustration of recognizing the transaction in both accountant and auditor perspective:
The seller (“Me”) uses Ex-Work to sell a product. As an accountant, we recognise the transaction when the product is collected by the buyer. On the other hand, auditor vouch to the delivery note to ascertain the risk and reward transfer whether it has been correctly accounted. The article above that we summaries from https://www.export.gov/article?id=Incoterms-Overview
