UCB+UGBA102A+Topic04+Slides

UCB+UGBA102A+Topic04+Slides - Sales, Purchases &...

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Sales, Purchases & Inventories UGBA102A Introduction to Financial Accounting
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UGBA102A Dennis Geyer 2 Operating Cycle Sales Cash Accounts Receivable Accounts Payable Inventory Purchases Sales Collections Issue Credit Payments
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UGBA102A Dennis Geyer 3 Financing (Cash-to-Cash) Period Inventory Receivables Payables Financing Period Purchase Sale Collection Payment
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UGBA102A Dennis Geyer 4 Sales & Purchases Adjustments Trade Discounts are deductions from list or catalog price to arrive at gross invoice price. Not recorded. Cash Discounts are deductions allowed from the gross invoice price taken if the invoice is paid within a specified period of time. Recorded as Sales or Purchases Discounts (contra-account). Returns represent merchandise returned by the buyer and considered a cancellation of the sale. Recorded as Sales or Purchases R & A (contra-account). Allowances are deductions from the original gross invoice price granted to a customer. Recorded as Sales or Purchases R & A (contra-account).
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UGBA102A Dennis Geyer 5 Sales & Purchases Transactions Two approaches may be used for recording sales or purchases transactions. Gross Method Assumes Buyer will not take cash discounts for early payment. Net Method Assumes Buyer will take cash discounts for early payment.
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UGBA102A 6 Sales & Purchases Transactions: Gross Method On July 12, a business sold merchandise for $20,000 on account. Terms are 2/10, n/30. We presume the Buyer will not take the discount. Gross Method On date of sale Seller Jul 12 Accounts Receivable 20,000 $ Sales 20,000 $ Buyer Jul 12 Purchases 20,000 $ Accounts Payable 20,000 $ If Buyer pays within 10 days Seller Jul 21 Cash 19,600 $ Sales Discounts 400 $ Accounts Receivable 20,000 $ Buyer Jul 21 Accounts Payable 20,000 $ Purchase Discounts 400 $ Cash 19,600 $ If Buyer misses deadline but pays withing 30 days Seller Aug 11 Cash 20,000 $ Accounts Receivable 20,000 $ Buyer Aug 11 Accounts Payable 20,000 $ Cash 20,000 $
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UGBA102A 7 Sales & Purchases Transactions: Net Method On July 12, a business sold merchandise for $20,000 on account. Terms are 2/10, n/30. We presume the Buyer will take the cash discount. Net Method On date of sale Seller Jul 12 Accounts Receivable 19,600 $ Sales 19,600 $ Buyer Jul 12 Purchases 19,600 $ Accounts Payable 19,600 $ If Buyer pays within 10 days Seller Jul 21 Cash 19,600 $ Accounts Receivable 19,600 $ Buyer Jul 21 Accounts Payable 19,600 $ Cash 19,600 $ If Buyer misses deadline but pays withing 30 days Seller Aug 11 Cash 20,000 $ Sales Discounts Not Taken
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This note was uploaded on 09/20/2009 for the course UGBA 102A taught by Professor Udpa during the Summer '07 term at Berkeley.

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UCB+UGBA102A+Topic04+Slides - Sales, Purchases &...

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