Why this is mistaken
Identify the right before measuring a shortfall. Evidence that the seller expected to accept less can reduce transaction price. Later evidence that an established receivable is less collectible ordinarily affects the credit-loss allowance. Preserve both alternatives until the contract and timing facts support one route.
Where to watch
When this mistake may appear
- The customer will pay less than the invoice.
- Record bad debt for the shortfall.
Check your work
Your work may contain this mistake if:
- Uses expected cash alone to select the model.
- Ignores customary price concessions and disputes.
- Does not establish an unconditional financial asset before applying credit-loss guidance.