Chapter6 (2) - Chapter 6 Reporting and Interpreting Sales...

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Chapter 6 Reporting and Interpreting Sales Revenue and Accounts Receivable Acct 2311 Zining Li
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2 Key Terms Sales revenues Sales returns Sales discount ( 2/10, n/30) Credit card discount All of these three are contra-revenue accounts Accounts receivable Allowance for doubtful account (contra-asset account) Net realizable value of A/R Bad debt expense
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3 Accounting for Sales Revenue Sales Revenue Less: Credit card discounts Sales discounts (a contra-revenue account) Sales returns and allowances (a contra-revenue account) Net Sales (reported on the income statement) Sales (revenue) reported on the Income Statement are net of credit card sales discount, sales discount, and sale returns.
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4 Accounting for Credit Card Discount Assume the credit card company charges a fee of 3% When sales of $1,000 are made by credit card purchases: Dr. Cash $970 Dr. Credit-card discount 30 Cr: Sales Revenue $1,000
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5 Accounting for Sales Discount Suppose the credit term is 2/10, n/30 When sales of $1,000 are made on account Dr. Accounts Receivable $1,000 Cr: Sales Revenue $1,000 When customers pay within 10 days, they enjoy 2% discount Dr. Cash $980 Dr. Sales Discount 20 Cr. Accounts Receivable $1,000 When customers pay after 10 days, they have to pay the full amount Dr. Cash $1,000 Cr. Accounts Receivable $1,000
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6 Accounting for Sales Returns When sales of $1,000 are made on account Dr. Accounts Receivable $1,000 Cr: Sales Revenue $1,000 When returns of $150 are made Dr. Sales Return $150 Cr. Accounts Receivable $150 When customers pay off the rest Dr. Cash $850 Cr. Accounts Receivable $850
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7 Measuring and Reporting Accounts Receivable Accounts receivable vs. Notes receivable Net Realizable Value of A/R Accounts Receivable Less: Allowance for doubtful accounts (a contra-asset account) = Net Realizable Value of Accounts Receivable Allowance for doubtful accounts contra-asset account the estimated amount of uncollectible A/R
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Chapter6 (2) - Chapter 6 Reporting and Interpreting Sales...

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