I work as the bookkeeper for a mail order company that just got acquired by a huge international company. We specialize in outdoor summer items, like lawn furniture, mosquito control devices, novelty pool items, grills, outdoor games, and so forth. The bulk of our orders come in during the months of May and June. We have a fiscal year end of June 30th, because once July hits, the orders drop off dramatically until next year. I’d say we do about 70% of our business in those two months.
My question has to do with the accrual method. I know that we do not include receipts in income until we ship the product. Prior to our acquisition, we were a small privately held company. We worked hard to get orders out as fast as they would come in. But now, the new managers just told us to slow down because we had already met our quota for the year. Apparently when they bought our company, they had certain revenue goals to meet. They want us to hold off shipping until July so that orders we have already received will count towards their quota for the next fiscal year.
Is that legal? Can they do that? And how does it affect the accrual method of accounting? Aren’t we supposed to recognize the income when we are ready to ship the product?
My question has to do with the accrual method. I know that we do not include receipts in income until we ship the product. Prior to our acquisition, we were a small privately held company. We worked hard to get orders out as fast as they would come in. But now, the new managers just told us to slow down because we had already met our quota for the year. Apparently when they bought our company, they had certain revenue goals to meet. They want us to hold off shipping until July so that orders we have already received will count towards their quota for the next fiscal year.
Is that legal? Can they do that? And how does it affect the accrual method of accounting? Aren’t we supposed to recognize the income when we are ready to ship the product?
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