Ch. 6 Simplified Notes

Ch. 6 Simplified Notes - Ch. 6 A. Revenue Recognition...

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Ch. 6 A. Revenue Recognition Principle 1. Revenues are reported when they are earned 2. Earnings process is complete or almost complete, collection is probable 3. Merchandise companies: when goods are transferred to buyer 4. Service companies: services are perfomed 5. Rules used by company should be disclosed in notes B. Shipping Terms 1. Destination-title changes on delivery, seller pays for shipping 2. Shipping Point-title changes at shipping point, buyer pays -Think about: when does risk and benefit of ownership transfer? C. Sales Discounts to Businesses 1. Incentive to encourage early payment of open account charges -2/10, n/30-2% discount if paid within 10 days, otherwise due in 30 - increases seller’s cash available if purchaser pays early - decreases chances customer will run out of funds and not pay D. Sales Returns and Allowances 1. Contra revenue account 2. Separate account than sales revenue account E. Reporting Net Sales Sales -Sales Returns and Allowances -Sales Discounts _________________________ Net Sales
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Ch. 6 Simplified Notes - Ch. 6 A. Revenue Recognition...

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