Chapter-11-Sales.ppt

11-1 SALESCHAPTER 11CHAPTER 1111-2Learning objectives:l1. Understand the features of cash sales and credit sales.l2. Distinguish the trade discount and the sales discount.l3. Be able to make entries for sales.11-3How does a company attempt to earn an income?Sales11-4selling products or merchandiseIncomebuying products or merchandiseSalesSales11-5SalesRevenues from salescost of goods soldoperating expensesgross margin from sales (gross margin or profit)factors concerning sales?11-6Net Incomegross margin from sales (gross margin or profit)SalesRevenues from salescost of goods soldoperating expenses11-7To be great enough to pay for cost of goods sold and operating expenses and to provide a sufficient net incomeSalesNet 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:11-8SalesGross sales consist of total sales on cash and sales on credit during a certain accounting period.Gross sales:11-9Suppose the sale is made for cash…Cash 1,000Revenues from Sales 1,000SalesThe entry?11-10Suppose the sale is made on credit …Accounts Receivable 1,000Revenues from Sales 1,000SalesThe entry?11-11Sales returns and allowances reflect the dissatisfaction of customers, so a company should provide efficient control of the sales returns and allowances. Sales Returns and AllowancesIf 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.11-12 Accounts Receivable (or Cash)Sales Returns and Allowances 200200Sales Returns and Allowances11-13If the debit side is sales account instead of sales returns and allowances?Sales Returns and AllowancesThe entry can’t reveal the dissatisfaction of customers.What about the entry?11-14Trade Discount and Sales DiscountIn 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?11-15 Hougas Equipment company sold store equipment to Stev’s 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 2,400Trade Discount and Sales Discount11-16Trade Discount and Sales DiscountThe 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 seller’s liquidity.11-17“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, let’s look at an example of sales discount.Trade Discount and Sales Discount11-18At 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 can’t 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11-19 Hougas sells equipment on March 7 on terms of 2/10, 1/20, n/30.The entry?Trade Discount and Sales Discount11-20 The entry to record the sales on March 7If Stev’s Barber Shop paid the amount on March 16Cash 1,400Accounts Receivable 1,000 Revenues from Sales 2,400Cash 980Sales Discount 20 Accounts Receivable 1,000 Trade Discount and Sales Discount11-21Trade Discount and Sales DiscountIf Stev’s Barber Shop paid the amount on March 26Cash ＄1,000 Accounts Receivable ＄1,000If Stev’s Barber Shop didn’t take advantage of the discount terms and paid the full amount on April 5Cash $ 990Sales Discount $ 10 Accounts Receivable $1,00011-22Purchases account? Which items should be recorded in the purchases account?11-23Purchases account?InventoryAutomobiles BuildingsMachinesRaw material11-24Purchases account?ResaleBuying products or merchandisePurchases account11-25Sales Returns and AllowancesDamagedUnsatisfying11-26Returns and AllowancesReturns Allowances 11-27WE ARE SAILING RIGHT ALONG!!。