Accounting Chapter 5 Notes

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Unformatted text preview: ounts receivable Sales Revenue Sale on account 5,000 5,000 June 11 Cost of good sold Inventory Recorded the cost of goods sold 2,900 2,900 When it receives the cash, it records the cash receipt on account as follows: June 19 Cash Account Receivable Collection on account 5,000 5,,000 Sales Discounts and Sales Returns Allowances - Sales returns and allowances and sales discounts decrease the net amount of revenue earned on sales. Sales returns and allowances and Sales discounts are contra accounts to Sales revenue. - There are separate accounts for Sales discounts and Sales returns and allowances so they can track these items separately. o Net sales revenue= Sales revenue – Sales returns and allowances- sales discount. i.e Sales made to customers- sales returned by customers ( or allowances granted to customers) – Discounts given to customers who paid early = Net sales - EX. Sales Return Journalization. (there’s two journalization. One to update sales and one to update inventory) July 12, 2014, the customer returns $600 of the goods. The seller records the sales return as follow: July 12 Sales Returns and Allowances 600 Account Receivable 600 Received returns goods July 12 Inventory 400 Cost of Goods Sold 400 Placed goods back in inventory Ex: Sales Allowance Journalization July 15 Sales Returns and Allowances 100 Account Receivable 100 Granted a sales allowance for damaged goods EX: Sale Discount Journalization Assuming no freight is included in the invoice, the company’s cash receipt is $6,370 [6,500- (6,500x.02)]. The entry is as follows; July 17 Cash 6,370 Sales Discount 130 Accounts receivable 6,500 Cash collection within the discount period - All selling transactions utilize accounts beginning with “s”, such as Sale Revenue, Sales returns and allowances, and Sales discounts Net Sales Revenues, Cost of Goods Sold, and Gross Profit - net sales revenue minus Cost of Goods Sold is called Gross Profit, or gross margin - Gross profit: extra amount the company received from the customer over what the company paid to the...
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This note was uploaded on 04/08/2014 for the course ECON 121 taught by Professor Ronald during the Spring '11 term at UMBC.

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