4 Revenue from Contract with Customer

Question 1

Revenue arisis in the course of ORDINARY activities

Journal entries to record revenue for
1. Sale of goods
2. Services
3. Other gains/losses (not from ordinary activities)

Answer 1

1. Sale of goods
   Dr Cash/acc receivables
   Cr Revenue

Dr COGS
Cr Inventory

2. Services
   Dr Cash/acc receivable
   Cr Revenue
3. Other gains/losses
   Dr Cash/acc receivable
   Dr Accumulated depreciation
   Cr Asset
   Cr Gain of sale/ Dr Loss of sale

Question 2

Formula for
1. Net income
2. Gross income
3. Operating income

Answer 2

1. Net income = Revenue - Expenses
2. Gross income = Revenue - COGS
3. Operating income = Gross income - operating expense

Question 3

Sales on credit (on account)

Sales discount for prompt payment method (eg sold $1,000 on credit with terms 2/10, n/30). Journal entry?

*Sales discount is Contra-Revenue

Answer 3

Sales of product on credit:
Dr acc receivable 980
Cr revenue 980

Payment received AFTER discount period:
Dr Cash 1,000
Cr Acc receivable 980
Revenue 20

Question 4

Sales paid by credit cards:

On Jan 19, ABC Ltd sold goods for $3,000 and accepted payment via a credit card. The credit card company charges a 2% service fee.

Answer 4

Dr Accounts Receivable (Credit Card Company) 2,940
Dr Credit Card Discount/Expense 60
Cr Revenue 3,000

Question 5

Sales return journal entries

Answer 5

Dr sales returns
Cr acc receivables/cash

Question 6

Collection on behalf of 3rd parties eg GST. Journal entries

Answer 6

Dr Accounts receivable
Cr GST payable (liability)
Cr Revenue