At what point do most companies recognize liabilities in the acquisition and payment cycle when the goods are shipped FOB destination?
A)When the purchase order is issued
B)When the vendor acknowledges receipt of the order
C)When the goods or services are received
D)When the vendor invoice is received

Question

Quizplus · Accepted Answer

When goods are shipped FOB destination, the ownership of goods and liability for them remains with the seller until they are received by the buyer, so the liability is recognized when the goods or services are received, not at any prior stage such as the issuance of the purchase order or acknowledgement of the order by the vendor. The liability is also not recognized when the vendor invoice is received, as this only confirms the amount owed, but the liability was already recognized when the goods were received.

At What Point Do Most Companies Recognize Liabilities in the Acquisition