Sale of goods is seemingly simple – you have goods, you have a customer who wants to buy them and you sell them. As you sell them, you recognize the sale in your accounts and that’s all really. 

However, it may not always be so easy. A pre-condition to recognizing any sale is the matter of risks and rewards connected to ownership and whether they’ve been transferred from you as the seller to the customer. If the point of sale for an example is your shop, you give the goods with the customers as they’ve paid for them, the transfer can be assumed since they’ve paid for the goods. If the payment is done at a later date, the transfer can still be assumed, since you’ve physically given the goods to the customer and the risks for sure have been transferred as such.

What happens if the goods are physically transported to the customer however? It’s not that easy to determine the time of the transfer if the shipment is for an example made to a longer distance even. When the goods are shipped to a distance, the delivery terms come into the equation and I must say, they’re not always followed for some reason. When you think about it however, once something goes bad, i.e. the goods get lost or something, it’s crucial to understand who had the risks.