5.3 recording of sales merchandise Flashcards

1
Q

what are the 5 steps to recognizing revenue received from selling goods

A

1) determine contract
2) determine performance obligations
3) determine transaction price
4) allocate transaction price to POs
5) recognize revenue as product is delivered

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2
Q

TRANSACTION PRICE IS REDUCED BY

A

variable consideration

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3
Q

variable consideration includes what?

A

the amount of expected sales return and allowancesS

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4
Q

SOOO transaction price is reduced by the

A

sales returns and allowances

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5
Q

How do we take into consideration sales returns,allowances, discounts under aspe

A

A) RECORD THE FULL AMOUNT OF THE SELLING PRICE
B) use a contra revenue account to record the sales returns/ allowances/ discounts

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6
Q

When is the performacne obligttion satisifed in the product sense?

A

when the ownership of goods has transferred from the seller to the buyer

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7
Q

EVIDENCE IS VERY IMPORTANT IN ACCOUNTING TRANSACTIONS

A

WORD

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8
Q

WHAT provides evidence for
1) cash transaction
2) transaction on account

A

cash register tapes

sales invoice

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9
Q

What are the two journal entries that need to be made to recrod each sale in a perpetual inventory system

A

1) record the sales revenue
2) recrod the cost of the emrchandise sold (Reduce inventory account)

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10
Q

What account tracks expected sales returns and allowances

A

refund liability

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11
Q

how do we incorproate the refund liability account into the two journal entries we make

A

1) in the recording of sales JE
-> Take out the refund liablity value from sales

2) In the cogs JE:
-> Take out the estimated inventory returns from cogs

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12
Q

on SOI why does most merch company only provide a single sales figure

A

1) hide info from comp
2) soi would be wayy longer

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13
Q

how is sales tax recorded by a company

A

NOT AS REVENUE!! recroded as sales tax payable

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14
Q

how does the buyer recrod the freight if fob destination

A

they dont

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15
Q

how does seller recrod the freight costs when fob destin

A

DR frieght out
CR cash

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16
Q

How do sellers recrod sales returns and allowances

2 JES

A

1) Decrease refund liability, DECREASE A/R
DR Refund Liability
CR A/R

2)iNCREASE INVENTORY IF GOODS ARE RESELLABLE, decrease estimated returns

DR Inventory
CR Estimated Inventory Returns

or

INCREASE cogs if not reselleable

DR COGS
CR estimated inventory returns

17
Q

How does a seller recrod reciepts of payment (being paid for the amounts they are owed)

A

DR Cash
CR A/R

18
Q
A