Chap006 - Reporting and Interpreting Sales Reporting and...

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Unformatted text preview: Reporting and Interpreting Sales Reporting and Interpreting Sales Revenue, Receivables, and Cash Revenue, Receivables, and Cash Chapter 6 6-2 Accounting for Sales Revenue The revenue principle requires that revenues be recorded when earned: Goods or services have been delivered. Collection is reasonably assured. Amount of customer payments known. 6-3 2/10, n/30 2/10, n/30 Sales Discounts When customers purchase on open account, they may be offered a sales discount to encourage early payment. Read as: “Two ten, net thirty” Discount Percentage # of Days in Discount Period Otherwise, the Full Amount Is Due Maximum Days in Credit Period 6-4 To Take or Not Take the Discount With discount terms of 2/10,n/30, a customer saves $2 on a $100 purchase by paying on the 10 th day instead of the 30 th day. Annual Interest Rate = 365 Days 20 Days × 2.04% = 37.23% $2 $98 = 2.04% Interest Rate for 20 Days = Interest Rate for 20 Days = Amount Saved Amount Paid 6-5 Sales Returns and Allowances Debited for damaged merchandise. Debited for returned merchandise. Contra revenue account. 6-6 Reporting Net Sales Companies record credit card discounts, sales discounts, and sales returns and allowances separately to allow management to monitor these transactions. 6-7 Gross Profit Percentage In 2006, Deckers reported gross profit of $141,199,000 on sales of $304,423,000. Gross Profit Percentage Gross Profit Net Sales = Other things equal, higher gross profit results in higher net income. Deckers Skechers U.S.A. Timberland 46.4% 43.4% 47.3% 2006 Gross Profit Comparisons Gross Profit Percentage $141,399,000 $304,423,000 = = 46.4% 6-8 When companies allow customers to purchase merchandise on an open account , the customer promises to pay the company in the future for the...
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This note was uploaded on 07/15/2011 for the course ACC 360 taught by Professor Marshallhunt during the Spring '09 term at University of Michigan-Dearborn.

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Chap006 - Reporting and Interpreting Sales Reporting and...

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