CH4 - Preparing financial statements - other considerations Flashcards
What is a return?
Returning unwanted goods to a business or the business may return goods to supplier
What is the double entry for a sales return as a credit transaction?
Dr Sales
Cr Trade Receivables
What is the double entry for a sales return as a cash transaction
Dr Sales
Cr Cash
What is a purchase return as a credit transaction?
Dr Trade Receivables
Cr Purchases
What is a purchase return as a cash transaction?
Dr Cash
Cr Purchases
What are the two types of discounts a business offers?
Trade (Bulk buy)
Early Settlement (Prompt Payment)
What is a Trade (Bulk buy) discount
Given as reduction at point of sale
What is an early settlement discount?
Account for resale purchase based on expected settlement
What happens if an early settlement is not as expected?
For sales recognise as an adjustment to revenue. For purchases difference between expected payments are recorded as an adjustment to purchase
What does payroll mean?
Salaries and wages of workers
How do we work out total staff costs?
Gross salaries + Employer’s NIC
What is the correct double entry to record payroll?
Dr Wages and salaries (gross salary + employers NIC)
Cr Cash (net salary paid to employee)
Cr Income Tax (PAYE + Employees’ NIC + Employer’s NIC)
