Chapter-11-Sales.ppt

Click to edit Master title style,Click to edit Master text styles,Second Level,Third Level,11-,*,SALES,CHAPTER 11,Learning objectives:,1.Understand the features of cash sales and credit sales.,2.Distinguish the trade discount and the sales discount.,3.Be able to make entries for sales.,How does a company attempt to earn an income?,Sales,selling products or merchandise,Income,buying products or merchandise,Sales,Sales,Sales,Revenues from sales,cost of goods sold,operating expenses,gross margin from sales(gross margin or profit),factors concerning sales?,Net Income,gross margin from sales(gross margin or profit),Sales,Revenues from sales,cost of goods sold,operating expenses,To be great enough to pay for cost of goods sold and operating expenses and to provide a sufficient net income,Sales,Net sales=gross proceeds from sales of merchandise-sales returns-allowances-sales discounts.,The increasing of sales indicates the potential growth and the decreasing means the possible decreased earnings and other financial problems in the future.,Net sales:,Sales,Gross sales consist of total sales on cash and sales on credit during a certain accounting period.,Gross sales:,Suppose the sale is made for cash,Cash 1,000,Revenues from Sales 1,000,Sales,The entry?,Suppose the sale is made on credit,Accounts Receivable 1,000,Revenues from Sales 1,000,Sales,The entry?,Sales returns and allowances reflect the dissatisfaction of customers,so a company should provide,efficient control of the sales returns and allowances.,Sales Returns and Allowances,If the commodities are in damaged condition or unsatisfying,the seller may allow the customer to,return the item,or,give the customer an allowance,off the sales price.,Accounts Receivable,(or Cash),Sales Returns and Allowances 200,200,Sales Returns and Allowances,If the debit side,is sales account instead of sales returns and allowances?,Sales Returns and Allowances,The entry cant reveal the dissatisfaction of customers.,What about the entry?,Trade Discount and Sales Discount,In order to get a big sale,a merchandising company usually quotes prices of goods at a discount(such as 20%,30%)off the list of catalogue price.,trade discount,.?,Trade discount?,Hougas Equipment company sold store equipment to Stevs Barber Shop listed at,3,000 with a trade discount of 20%.Hougas collected,1,400 for cash and agreed to collect the other part in the future.,The entry?,Cash 1,400,Accounts Receivable$1,000,Revenues from Sales 2,400,Trade Discount and Sales Discount,Trade Discount and Sales Discount,The seller often provides discounts to the customer in order to let the seller pay early.Such discount is called sales discount.,sales discount,.?,Sales discount?,Sales discount can increase the sellers liquidity.,“2/10,1/20,n/30”,The customer may take a 2 percent discount if the debt is paid within 10 days and 1 percent discount if the it is paid within 20 days.,The term of n/30 indicates that the customer must pay the full amount after 30 days without discount.,Now,lets look at an example of sales discount.,Trade Discount and Sales Discount,At the end of the accounting period,the Sales Discounts account has accumulated all the sales discounts taken during the accounting period.,Sales discounts are recorded only at the time the customer pays because the seller cant know whether the customer will take advantage of the discount by paying in the discount period.,Sales discounts are considered a contra revenue account since sales discounts reduce revenues from sales.,Trade Discount and Sales Discount,Hougas sells equipment on March 7 on terms of 2/10,1/20,n/30.,The,entry?,Trade Discount and Sales Discount,The entry to record the sales on March 7,If Stevs Barber Shop paid the amount on March 16,Cash 1,400,Accounts Receivable 1,000,Revenues from Sales 2,400,Cash 980,Sales Discount 20,Accounts Receivable 1,000,Trade Discount and Sales Discount,Trade Discount and Sales Discount,If Stevs Barber Shop paid the amount on March 26,Cash,1,000,Accounts Receivable,1,000,If Stevs Barber Shop didnt take advantage of the discount terms and paid the full amount on April 5,Cash$990,Sales Discount$10,Accounts Receivable$1,000,Purchases account?Which items,should be,recorded in the,purchases,account,?,Purchases account?,Inventory,Automobiles,Buildings,Machines,Raw material,?,Purchases account?,Resale,Buying products or,merchandise,Purchases account,Sales Returns and Allowances,Damaged,Unsatisfying,Returns and Allowances,Returns,Allowances,WE ARE SAILING RIGHT ALONG!,