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Accounting Summary2 - Chapter 6 Net sales = sales revenue...

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6-10 2/10, n/30 2/10, n/30 Discount Percentage # of Days in Discount Period Otherwise, the Full Amount Is Due Maximum Days in Credit Period Sales Discounts Chapter 6 Net sales = sales revenue – (credit card discounts + sales discounts + sales returns and allowances [debited for damaged and returned merchandise]) Sales returns and allowances = contra revenue account Credit cards customer sale = company pays fee to provider but increase sales, minimizes losses from bad checks and fraudulent credit card sales, quicker payment and avoids providing credit directly to customer Gross profit percentage = gross profit / net sales Higher gross profit = higher markup All other things equal, higher gross profit is higher net income Because of matching principle, bad debt expense (estimate) and sales revenue Estimate bad debit expense by percentage of credit card sales and aging of accounts receivable Percentage based on credit card sales from previous years that were uncollected Amount estimated = credit sales * percent estimated
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