lec06 - Chapter6:ReportingandInterpretingSales...

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Slide 1 Chapter 6: Reporting and Interpreting Sales  Revenue, Receivables, and Cash
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Slide 2 Learning Objectives Apply the revenue recognition principle to determine the  timing of recording revenue (When?) Analyze the impact of credit card sales, sales discount and  sales return on the amounts reported as net sales (How  much?) Estimate and report the effects of bad debts on F/S Journal Entries Percentage of credit sales approach Aging method
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Slide 3  Accounting for Sales Revenue The  revenue principle   requires that revenues be recorded when earned: 1. Goods or services have been delivered. 2. Evidence of an arrangement for customer  payments. 3. Price is fixed or determinable. 4. Collection is reasonably assured.
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Slide 4 When to recognize?- the timing Sellers of goods  The criteria are mostly met and revenue is usually  recognized when title and risks of ownership are transferred  to buyers Exact timing determined by the shipping terms: FOB shipping point: title changes hands and revenue recognized at  shipment FOB destination: title changes hands and revenue recognized at  delivery Service companies Record revenue when they have provided services to buyers.
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Slide 5 Where to find revenue recognition policy? Revenue recognition policy for SmarTone http://202.66.146.82/listco/hk/smartone/annual/2010/ar2010.pdf
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Slide 6  Reporting Net Sales: How much?     Companies record credit card discounts, sales discounts, and sales returns and allowances  separately to allow management to monitor these transactions.
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Slide 7  Credit Card Sales Companies accept  credit cards   for several reasons: 1. To increase sales. 2. To avoid providing credit directly to customers. 3. To avoid losses due to bad checks. 4. To receive payment quicker.     When credit card sales are  made,  the company must pay  the credit card company a fee  for the service it provides.
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Slide 8 Credit Card Sales to Consumers    On January 2, a Timberland factory store s credit card  sales were $3,000.  The credit card company charges a 3% service fee. Prepare the Timberland journal entry. GENERAL JOURNAL Page 34 Date Description Debit Credit Jan. 2
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GENERAL JOURNAL Page 34 Date Description Debit Credit Jan. 2 Accounts Receivable 2,910 Credit Card Discounts 90 Sales Revenue 3,000 $3,000 × 3% = $90 Credit Card Fee Credit Card Sales to Consumers    On January 2, a Timberland factory store s credit card  sales were $3,000.  The credit card company charges a 3% service fee. Prepare the Timberland journal entry.
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This note was uploaded on 12/28/2010 for the course BUSINESS A ACCT101 taught by Professor Haifengyou during the Fall '10 term at HKUST.

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lec06 - Chapter6:ReportingandInterpretingSales...

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