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Newspaper Sales - Gross or Net?

Retail sales revenue recogntition rules

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Hi All,

I've recently volunteered my time to a local community shop to help with them with their accounting and one of their primary sources of income is newspaper sales.

I wonder whether these should be recorded as gross or net for the purposes of revenue recognition given that the provider of the newspapers does so on a sale or return basis so the shop doesn't pay for anything unsold (providing returned on time) and also the price of the newspapers are set by the publishers.  On the reverse side, the shop retains credit risk for any papers that are sold but unpaid for and also the shop would be liable if the newspapers were lost/stolen.

Interested to hear your opinions and experience.

Thanks

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14th Aug 2019 12:34

Who will be using the accounts and what do they need to know? If they want to track whether they are madly over- ordering it might be helpful to track returns, otherwise I wouldn't bother.
Bad debts is a separate issue - record separately
Lost/stolen will normally just get picked up in the margins, no need to track these unless someone really wants to know.
I'd keep it simple if you are volunteering

Thanks (1)
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By DanDLW
to accountantccole
14th Aug 2019 12:43

Thanks for your response.

These are for the official accounts that will be filed. The shop is covered by the Co-operative and Community Benefit Societies Act 2014 rather than the Companies Act and is therefore required to publish full accounts (P&L, BS etc).

It was here then that I was wondering whether these newspaper sales should be shown as the sale in Turnover and the purchase in Cost of Sales or if the two should be netted together under Turnover.

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to DanDLW
14th Aug 2019 12:49

DanDLW wrote:

It was here then that I was wondering whether these newspaper sales should be shown as the sale in Turnover and the purchase in Cost of Sales or if the two should be netted together under Turnover.

Why would you not do the former? That is how you are treating the rest of your sales isn't it?

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By DanDLW
to WhichTyler
14th Aug 2019 13:03

It's whether we are seen as the agent or principal for the sale of these newspapers that I'm seeking clarity on.

FRS 102, 23.4 states that in an agent relationship "an entity shall include in revenue onlt the amount of its commission...amounts collected on behalf of the principle are not revenue of the entity"

Given we are only billed by the distributor for the newspapers that we actually sold, does that make us an agent and therefore only eligible to the net element of the sale?

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to DanDLW
14th Aug 2019 13:13

No, I don't think you are an agent

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By DanDLW
to WhichTyler
14th Aug 2019 13:15

Thanks

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to DanDLW
14th Aug 2019 13:33

DanDLW wrote:

It's whether we are seen as the agent or principal for the sale of these newspapers that I'm seeking clarity on.

What does your contract say ?

You're not an agent, you're not on commission and what suggests that to me is that you're responsible for any papers lost or stolen.

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By DJKL
14th Aug 2019 12:55

Obviously the sales go in gross.

The purchases are the invoices less any credits re returns, but from long distant memory they were shown on the same piece of paper with the net amount shown post the returns.

It is certainly important to record this way if a vat apportionment scheme is in use (papers I recall being zero rated)

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By DanDLW
to DJKL
14th Aug 2019 13:07

Thanks

Yes, the invoice we receive from the distributor shows both the newspapers that were sent to us, less then newspapers that were returned.

This is why I was concerned whether we are considered an agent to their principal, given we are essentially selling on their behalf and only pocketing the profit on any that we do sell

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to DanDLW
14th Aug 2019 13:11

DanDLW wrote:

This is why I was concerned whether we are considered an agent to their principal, given we are essentially selling on their behalf and only pocketing the profit on any that we do sell

You are over thinking the situation.
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By DanDLW
to Wanderer
14th Aug 2019 13:14

Fair enough.

I shalln't let myself lose any sleep over this, but thought for the sake of prudence, would consult with the brain trust.

Thanks

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to DJKL
14th Aug 2019 13:09

Agree.

Sales gross. Less Purchases = amounts paid/invoiced by supplier.

If there are any goods lost or stolen and these can be reliably quantified they can be entered as an expense if it is helpful.

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14th Aug 2019 13:56

You are definitely over thinking it, for accounting purposes the sales are the sales and the purchases are the purchases. With the newspapers there's just an extra agreement form the supplier to accept a return of unsold stock, it doesn't change the position of anyone in the transaction.

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