Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q26Q.

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 1031

Short Answer

Explain a principal-agent relationship and its significance to revenue recognition.

The principal-agent relationship states that the principal's performance role is to deliver goods or provide services for the customer.

See the step by step solution

Step by Step Solution

Meaning of Principal-Agent Relationship

A principal-agent relationship is one entity appoints another to operate on its behalf legally. The agent acts on behalf of the principle in a principal-agent relationship and should not have a conflict of interest in carrying out the act.

Principal-agent relationship and its significance

In a principal-agent relationship, the principal's performance responsibility is to supply products or execute services for a client. The agent's performance responsibility is to have the principal arrange to deliver these products or services to a client. In a principal-agent relationship, the amount collected by the agent on behalf of the principal is not considered revenue. The amount of commission received by the agent is its income (usually a percentage of the sales price or total revenue).

Most popular questions for Business-studies Textbooks

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.