Illustrating the recording of sales returns, Accounting Basics

Assignment Help:

Q. Illustrating the recording of sales returns?

Following are two instances illustrating the recording of sales returns in the Sales Returns and Allowances account

- Suppose that a customer returns USD 300 of goods sold on account. If payment hasn't yet been received the required entry is

1736_Illustrating the recording of sales returns.png

- Suppose that the customer has previously paid the account and the seller gives the customer a cash refund. Now the credit is to Cash rather than to Accounts Receivable. If the customer has occupied a 2 percent discount when paying the account the company would return to the customer the sales price less the sales discount amount. For instance if a customer returns goods that sold for USD 300 on which a 2 percent discount was taken the following entry would be made

70_Illustrating the recording of sales returns1.png

The debit to the Allowances and Sales Returns account is for the full selling price of the purchase. The credit of USD 6 decreases the balance of the Sales Discounts account.

Next we exemplify the recording of a sales allowance in the Allowances and Sales Returns account. Suppose that a company grants a USD 400 allowance to a customer for damage resulting from improperly packed merchandise. If the customer hasn't yet paid the account the required entry would be

614_Illustrating the recording of sales returns2.png

If the customer has previously paid the account the credit is to Cash instead of Accounts Receivable. If the customer take a 2 percent discount when paying the account the company would refund merely the net amount (USD 392). The Sales Discounts would be credited for USD8 and The entry would be

1261_Illustrating the recording of sales returns3.png

It demonstrates how a company could report sales discounts, sales and sales returns and allowances in the income statement. More frequently the income statement in a company's annual report begins with Net sales for the reason that sales details aren't important to external financial statement users.


Related Discussions:- Illustrating the recording of sales returns

Genentech, Genentech, Inc. is a California-based biotech pioneer recently a...

Genentech, Inc. is a California-based biotech pioneer recently acquired by Swiss pharmaceutical giant Roche Holding AG. Roche paid $46.8 billion in cash for the 44 percent of Gen

Exercise 5-3 analyzing and recording merchandise, Exercise 5-3 Analyzing an...

Exercise 5-3 Analyzing and recording merchandise transactions-both buyer and seller LO P1, P2 Santa Fe Company purchased merchandise for resale from Mesa Company with an invo

Prepare a source document, Q. Prepare a source document? A source docum...

Q. Prepare a source document? A source document typically supports the evidence of the transaction. A source document is any printed or written evidence of a business transacti

Advantages and disadvantages of fifo, Advantages and disadvantages of FIFO ...

Advantages and disadvantages of FIFO The FIFO method has four main advantages (a) it is easy to apply (b) the assumed flow of costs corresponds with the normal physical flow o

Recording, does immaterial items have to be recorded

does immaterial items have to be recorded

Journal.., i want to clear concepts of journal

i want to clear concepts of journal

A store receives $400 cash after offering a chain, A store receives $400 ca...

A store receives $400 cash after offering a chain discount of 10/10/5 on a good. What was the list price? A. $492.20 B. $519.82 C. $533.33 D. $612.00

Applied research project, I just want part A and Part B including ppt slide...

I just want part A and Part B including ppt slides to present.

What is merchandise returns, What is Merchandise returns A Return is...

What is Merchandise returns A Return is when a customer returns to the seller part or all items purchased. An Allowance occurs when seller grants a customer a price reductio

Uses of cash flow statements, Uses of cash flow statements: The main us...

Uses of cash flow statements: The main usefulness of cash flow analysis is that it facilitates the Finance manager to approximation the cash necessities of the firm and match t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd