Bookkeeping 21

Question 1

1. Explain the SALES RETURNS CONTRA REVENUE account:

Answer 1

it contains either an allowance for RETURNED GOODS, or the actual amount of REVENUE DEDUCTION attributable to RETURNED GOODS.

Question 2

2. Explain the SALES ALLOWANCES CONTRA REVENUE account

Answer 2

It contains either an allowance for reductions in the price of a product that has minor defects, or the actual amount of the allowance attributable to specific sales.

Question 3

3. Explain the SALES DISCOUNT CONTRA REVENUE account:

Answer 3

It contains the amount of sales discounts given to customers, which is usually a discount given in exchange for early payment by customers.

Question 4

4. The balances in CONTRA ACCOUNTS are reduced when:

Answer 4

the ASSETS or LIABILITIES with which they are paired are disposed of.

Question 5

5. Thus, when a FIXED ASSET is sold, the ACCUMULATED DEPRECIATION associated with it is:

Answer 5

REVERSED. Otherwise, the balances in the various contra asset accounts would continue to increase over time.

Question 6

6. CONTRA REVENUE accounts appear in which Financial Statement?

Answer 6

near the top of the Income Statement, AS A DEDUCTION FROM GROSS SALES.