Question

Accounting Information Systems

Narrative - GGKey

Our store, GGKey is a “gray market” distributor of software license keys. This means we are reselling software keys for popular software from reputable vendors, including but not limited to Microsoft, Adobe and SAP. The licenses may or may not be directly obtained from the original vendor. For example, we may be selling Windows 10 keys many times cheaper than their retail price. [For example, the level of validity that we can attest to a software license we sell.]

This is accomplished through a number of means, including but not limited to obtaining “extra” keys from enterprise administrators that were purchased legitimately at volume. This is our market niche. Customers come to us because our prices are very cheap for otherwise rather legitimate keys. We have a great variety in both price and quality between our products that we offer.

Our customers typically know exactly what they are looking for, so we do not have to spend much in marketing. Instead, we have optimized our website to appear in searches on common search engines when “cheap office / windows / SAP” keys are punched in.

The customer is taken to a landing page that allows intuitive navigation to the necessary software license. We pair with reputable transaction facilitators, such as PayPal, AmazonPay and PayProGlobal. After the order has been placed the requests are added to Review Batch for Reconciliation.

This makes a preliminary automated entry in our web based AIS. An accounting clerk periodically verifies the validity of these requests and ensures that payments are posted on the receivables end and confirms that the goods have been electronically delivered to the customer through their provided email. Since we are not the original creator of the goods we sell, it has proved challenging to ensure delivery and receipt of goods. We have come up with a technological solution - an HTTP request to a Web Application Programming Interface is embedded within the email containing the license key to ensure that the customer has successfully opened the email. This fulfills the requirements of the revenue recognition principles by confirming the delivery of goods to the customer.

Since we cannot always ensure the quality of goods, beyond sample testing, we offer a very generous return policy on our keys. The customer must first request a replacement if the key did not work. The customer’s screen is shared with a support technician to combat fraud and abuse. If the software fails to register successfully on the second attempt, a refund is issued.

Question: What does this [highlighting] sentence mean in the narrative?

Note: I also posted an REA Diagram below just to help what this narrative is about, you can use it as a source to assist you or optional not to use. Just so you can have an understanding for this narrative.

Shopping Cart H Marketing Licensing Sales Customer Cash amounts H Cash receipt H Accounting Clerk

Answer 1

This narrative is all about selling of software licence keys and how to recognise the revenue based on such transactions such as sale and sales returns. It is nothing but e-commerce. Where all the transactions are made online.

Thetransactions are recorded in such a way that there cannot be any omission of transaction. The customers orders are recorded and reconciled in the way of batch processing.

It means that all the the request up to a certain period are recorded in one batch and then it starts processing of all the requests received and the products are sent to the customers after recognising the revenue confirmed by the accountant of the requests received. Once the batch is processed the results are sent to the customers and then only the next batch starts processing.

Revenue recognition must be done after the sale is made even though the customer has seen or not seen the mail send to them. Refund policy is easy to initiate, thereby we have to be certain if there are any frauds are not.