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Will recording the rebates affect tesco current ratio

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Reference no: EM133062682

Question - Tesco has agreements to receive rebates (money back) from its suppliers upon reaching pre-specified sale volumes. Assume that it enters into an agreement with a supplier by which Tesco will receive £500,000 if the sales of the supplier's products double in the financial year. Tesco has managed to reach the target but has not received the cash yet when preparing its accounts. Should Tesco make any adjustments to its accounts at the end of the year? Will recording the rebates affect Tesco's current ratio (=current assets/current liabilities)? Explain.

Reference no: EM133062682

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