Chapter 6

Question 1

Sales Return Double Entry

Answer 1

Dr - sales
Cr - receivables

Issue a credit note - my be recorded in a separate sales ledger account

Question 2

Purchase return double entry

Answer 2

Dr - payables
Cr - purchases

Issue a debit note - may use a separate purchases returns ledger

Question 3

Credit note

Answer 3

A document issued during a sales return to cancel all or part of a sales invoice to show the amount no longer owed

Question 4

Debit note

Answer 4

A document issued during a purchases return as a formal request for a credit note to be raised

Question 5

Trade discounts

Answer 5

A reduction in the cost of goods usually from bulk buying - price is already deducted at sale/purchase

Question 6

Early settlement (or cash) discount

Answer 6

A reduction in the amount payable for credit sales for immediate or early payment

If offer is expected to be taken it is recorded net of early settlement (discount is applied to price)

If offer is not expected to be taken it is recorded ignoring the settlement discount

Question 7

Early settlement accounting - is expected to take it and does pay early

Answer 7

At point of sale
Dr - receivables (discounted value)
Cr - sales income (discounted value)

Figure is the discounted value (price x 0.xx)

As expected
Dr - cash (discounted value)
Cr - receivables (discounted value)

Question 8

Early settlement accounting - is expected to take it but then doesn’t

Answer 8

At point of sale
Dr - receivables (discounted value)
Cr - sales income (discounted value)

Doesn’t pay early
Dr - cash (full price)
Cr - receivables (discount price)
Cr - sales income (full price - discount price)

Question 9

Early settlement accounting - not expected to take it up and doesn’t

Answer 9

At point of sale
Dr - receivables (full price)
Cr - sales income (full price)

As expected (don’t take it up)
Dr - cash (full price)
Cr - receivables (full price)

Question 10

Early settlement accounting - not expected to take it up but does

Answer 10

At point of sale
Dr - receivables (full price)
Cr - sales income (full price)

Does take it up
Dr - cash (discount price)
Dr - sales income (full price - discount price)
Cr - receivables (full price)

Question 11

Refund

Answer 11

Double entry to the debit receivables control account
Dr - receivables
Cr - cash