5. Accounting for returns, carriage and discounts Flashcards
Credit sales returns
DR sales returns
CR receivables
Cash sales returns
DR sales returns
CR Cash
Credit purchase returns
DR payables
CR purchase returns
Cash purchase returns
DR cash
CR purchase returns
Carriage outwards (sales)
carriage on goods sold by the organization
treated as an expense against gross profit
Carriage inwards (purchases)
carriage charged by the supplier on purchases
treated as an expense in cost of sales
Discounts
reduction in amount paid for goods and services
either trade or cash discounts
Trade discounts
are given to increase the volume of sales
reduction in selling price = bulk buying more attractive
ONLY DEDUCTED FROM QUOTED PRICE AND NOT ACCOUNTED FOR
Cash discounts
referred to as a settlement discount
MUST BE ACCOUNTED FOR
Both trade and cash discounts
if given both trade and cash discount, trade discount must be applied before the cash discount is calculated
Cash discount allowed
DR Discounts allowed
CR Receivables
part of net profit number in SPL
Discount received
DR Payables
CR Discounts received
part of the net profit number in SPL
