Accounting Chapter 5 Notes

Sales return journalization theres two journalization

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Unformatted text preview: quantity or price of inventory is either debited or credited to the asset, inventory, based on the rules of debit and credit. Increases debit Inventory (increase in quantity or cost per unit). Decreases credit Inventory (decrease in quantity or cost per unit) Sale of Inventory - The amount a business ears from selling merchandise inventory is called Sales revenue (sales) - At the time of the sale, two entries must be recorded in the perpetual system: 1. Records the sale and the cash (or receivable) at the time of the sale. 2. The second entry records Cost of goods sold (debit the expenses) and reduces the Inventory (credit the asset). Aka, Updates the inventory, - Cost of Goods Sold (COGS): The cost of inventory that has been sold to customer. It is the merchandiser’s major expense. • A sale Revenue: the customer may return goods to a company, asking for a refund or credit to the customer’s account. • A sales allowance: A company may grant a sales allowance to entice the customer to accept non- standard goods. This allowance will reduce the future cash collected from the customer • A Sales discount: If a customer pays within the discount period o 2/10 = 2% discount if you purchase within 10 days o n/30 = No Discount • Freight out: Smart touch may have to pay delivery expense to transport the goods to the buyer. Cash Sale - To the seller, a sales invoice is a bill showing what amount the customer must pay. EX: Journalizing Cash sales of 3,000 (showing the 2 journal entries. Sales, and updating inventory) June 9 Cash Sale Revenue Cash Sale. 3,000 3,000 - (suppose the goods cost a company 1,900 dollars. The 2nd journal entry will transfer the 1,9000 from the Inventory account to the Cost of goods sold account. As follows; June 9 Cost of Goods Sold Inventory Recorded the cost of goods sold. 1,900 1,900 - Cost of good sold is always based on the company’s cost, not the retail price. Sale on Account - Most sale in the US are made on account (on credit). Now let’s assume a company made a$5,000 sale on account for goods, that cost 2,900. The entries to record the sale and cost of goods sold follows: June 11 Acc...
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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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