Week 6 Sales revenue+Receivable (instructor) - ACCT2010...

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  • ACCT 2010
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ACCT2010Principles ofAccounting ISales revenue; receivable andinternal control of cash1
ContentI.Shipping terms & net salesII.Classifying receivablesIII.Accounting for bad debtsIV.Recording discounts & returnsV.Financial analysis toolVI.Class activitiesa.Recording, reporting & evaluating a bad debt estimateb.Preparing income statement & computing receivable turnover ratiowith discounts, returns & bad debts2
ACCT2010Principles ofAccounting II.Shipping terms & net sales3
Shipping terms & net sales1.Revenue recognition: revenues be recognized (recorded)when they are earned, i.e., goods delivered or servicesprovidedbut how do we know?2.Earnedwhen title & risks of ownership transferred to buyer3.Shipping terms mattera.FOB (free on board)shipping pointtitle changes hands atshipping (at seller’s terminal/shipping dock)b.FOB destination– title changes hands at delivery (at buyer’sterminal/receiving dock)4
Shipping terms & net sales4.Sales revenue (gross sales)total sales recognized based onrevenue rules5.Net salesfirst line reported on income statement, whileGross salesminus (contra revenue)the followingequals tonet salesa.Credit card discountb.Sales discountsc.Sales returns & allowances5
Shipping terms & net sales6.Credit card discount, i.e., Visa, Master, American Expressa.Benefits: avoid losses due to bad debts, bad checksb.But x% fee based on credit card sales for such services7.Sales discountsa.Sales transactions on account, i.e., credit period say 30 days,60 days or 90 days etc.b.Can provide customers with incentive to pay early, how?c.Credit terms sayn/30 means full price is due within 30days of invoice date, n stands for what?d.What about early payment incentive 2/10, n/306
Shipping terms & net sales8.Sales returnsa.Customers have the right to return defective orunsatisfactory merchandiseb.Resulting in refund or downward adjustment to invoice (bill)9.Sales allowancesa.In principle, very similar to sales returnsb.But the discrepancy is tolerable, customers accept thedeliveryc.Still downward adjustment to invoice neededd.Use of “Sales returns & allowances” account7

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Term
Fall
Professor
AllenHuang
Tags
Accounting, Revenue, Sales, Net Sales

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