Chapter 5 - Returns, discounts and sales tax Flashcards
what is the double entry for a sales return?
Dr Sales returns
Cr Cash
What is the double entry for a purchase return?
Dr Cash
Cr Purchase returns
What is a discount?
The amount paid for goods and services
What is a trade discount?
Offered by a seller to the customer in an attempt to increase the volume fo sales made
What is a settlement (cash) discount?
This type of discount encourages credit customers to pay amounts outstanding earlier than they have previously agreed
How are trade discounts accounted for?
deducted at the point of sale by the seller when preparing the sale invoice and is NOT accounted for in the accounting records of either the seller or purchaser
How are settlement discounts accounted for?
Recorded if agreed in normal accounts plus s.d account
If a settlement discount is offered and paid early what is the accounting?
Dr Payable
Cr Cash
Cr Discount received
If a settlement discount is offered and not paid early what is the accounting?
Dr Payable
Cr Cash
what is sales tax?
a tax imposed by the government on the supply of goods and services. Levied at the point of sale, collected by the seller and passed on to the government or tax authority.
what is output tax?
The additional amount an entity will charge on sales of goods and services to its customers
what is input tax?
this is the additional amount charged to an entity on goods and services purchased from suppliers.
What is the net selling price?
set by the entity which will be its sales revenue
What is the gross selling price?
the price charges to customers
What is the difference between net and gross selling price?
the sales tax collected on behalf of the tax authority
