Bill-And-Hold Basis

AAA

DEFINITION of 'Bill-And-Hold Basis'

A method of conducting sales by billing the customer on the same day the transaction occurs, but not delivering the goods until a later date. Using the bill-and-hold basis is sometimes regarded as a controversial practice because allowing the seller to receive payment now, but making them wait a length of time before transferring the product could be used to inflate revenues meant for subsequent quarters.

INVESTOPEDIA EXPLAINS 'Bill-And-Hold Basis'

The bill-and-hold basis is one method of revenue recognition. According to the Securities and Exchange Commission, it is the buyer's responsibility to request that a transaction be on a bill-and-hold basis and must have substantial business purposes in doing so. In addition to those criteria, any goods sold under this basis must be finished goods at the time of sale and not be available to fulfill any other orders.

In 1998, Sunbeam CEO, Al Dunlap used a bill-and-hold strategy in order to make Sunbean's financial performance better than it really was by artificially inflating Sun Beam's revenue by 18%. Eventually, Dunlap was relieved of his station as the board of directors realized that he did not do anything to materially improve the company's financial situation.

RELATED TERMS
  1. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's ...
  3. Revenue Recognition

    An accounting principle under generally accepted accounting principles ...
  4. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  5. Wealth Management

    A high-level professional service that combines financial/investment ...
  6. Chart Of Accounts

    A listing of each account a company owns, along with the account ...
RELATED FAQS
  1. When should a company recognize revenues on its books?

    When a company makes revenues from its operations, it must be recorded in the general ledger and then reported on the income ... Read Full Answer >>
  2. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  3. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  4. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  5. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
Related Articles
  1. Markets

    A Clear Look At EBITDA

    This measure has its benefits, but it can also present earnings through rose-colored glasses.
  2. Personal Finance

    Top 8 Ways Companies Cook The Books

    Find out more about the fraudulent accounting methods some companies use to fool investors.
  3. Fundamental Analysis

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  4. Fundamental Analysis

    Understanding Pro-Forma Earnings

    These figures can either shed light on a company's performance or skew it. Find out why.
  5. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  6. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  7. Economics

    Understanding the Top Line

    Top line refers to a company’s gross sales without any reductions for discounts or returns.
  8. Economics

    What's an Allowance for Doubtful Accounts?

    The allowance for doubtful accounts represents the percentage of the accounts receivable the company expects to write-off as uncollectible.
  9. Fundamental Analysis

    Understanding Activity Ratios

    Activity ratios measure how effectively a business uses its assets.
  10. Investing Basics

    What is Accrued Income?

    In a mutual fund, accrued income is earnings that have accumulated over the year, but have not yet been paid out to shareholders.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!