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Sales Revenue, Revenue Recognition
Improper sales revenue recognition is the single largest issue contributing to financial restatements. Understanding and applying the rules of sales revenue recognition is not just an accounting problem; it is a marketing problem, too. Thus, it is important that the sales force has a basic understanding of the rules of sales recognition and be aware of when they should seek advice from accounting on the details of sales agreements. Unfortunately, most marketing and sales curricula neither expose nor alert students to sales revenue recognition issues and the resulting ethical, financial, legal and marketing consequences of improper revenue recognition. Such students, after joining the workforce, may pursue certain marketing goals, strategies and tactics which may lead them unknowingly to engage in unethical and/or illegal practices. Our findings based on a survey of 300 undergraduate students highlight the deficiencies in their understanding of what counts as sales. The survey used real cases where SIC found that misreporting of sales has occurred.
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