Common deductions from gross sales, Accounting Basics

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Q. Common deductions from gross sales?

Generally sales are for cash or on account when a sale is for cash the debit is to Cash and the credit is to Sales. While a sale is on account the debit is to Accounts Receivable and the credit is to Sales.

When companies tender trade discounts the gross selling price gross invoice price at which the sale is recorded is equal to the list price minus any trade discounts.

Two common deductions from gross sales are (a) sales discounts and (b) sales returns and allowances. These subtractions are recorded in contra revenue accounts to the Sales account. The Sales Discounts account as well as the Sales Returns and Allowances account normally has debit balances. Net sales = Sales - (Sales discounts + Sales returns and allowances).


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