100%(3)3 out of 3 people found this document helpful
This preview shows page 21 - 24 out of 67 pages.
When take discount Journal Entry:Acct. Payable3500Cash3430Inventory70(To record payment within discount period)If Do Not take discount:Accounts Payable3500Cash3500(To record payment when no discount taken)Should always take the discount. If not it’s like paying interest of 2% on $3500 for 20 days. Which = an-nual rate of 36.5%III. Recording Sales of MerchandiseSales Revenues are recorded when earned. Typically, earned when goods transfer from seller to buyer. Sales must be supported by business documents. Cash register tape provides evidence of cash sale. Sales invoice is evidence of credit sales. 2 entries are made for each sale:1) Accounts Receivable3800Sales3800First entry records the sale. The debit is to Accounts Receivable if credit sale and to cash if cash sale. Second entry records cost of merchandise sold:2) Cost of Goods Sold2400Inventory2400For Internal decision making companies many have sales accounts for each major product line. Companymanagement can monitor sales more closely. For outside users Financial Statements (FS) a merchandiser would provide only a single sales figure.Sale Returns and Allowances– The opposite of Purchase Returns and Allowances are Sales Returns and Allowances recorded on the books of the seller.Entries for sales returns and allowances: 1) Sales Returns and Allowances 300Accounts Receivable 300(To record credit for returned goods)2) Inventory140Cost of goods sold140(To record cost of goods returned)