ACCT 240 004 10 8 Chapter 6 Reporting and Interpreting Sales Revenue Receivables and Cash Accounting for Sales Revenue Revenue principle says that revenues should be recorded when they are earned Goods or services must be delivered There must be a payment arrangement Price is fixed or determinable Collection is reasonably assured FOB Shipping point means that the object is the buyer s as soon as it is shipped FOB Destination means that the object is the buyer s when they actually receive it Credit Card Sales to Consumers Companies accept credit cards for several reasons 1 Increase sales 2 Avoid providing credit directly to customers 3 Avoid losses due to bad checks 4 Avoid loss due to fraudulent credit card sales 5 Receive payment quicker Credit card sales cause company to have to pay a fee to credit card company Sales discounts to businesses When customers purchase on open account they may be offered a sales discount to encourage early payment Discount percentage of days in discount period net total sales less returns Maximum days in credit period 2 10 n 30 Read Two ten net thirty Pg 310 Ex E6 1 1 6 850 700 Less Sales discount 17 2 28 450 Net Sales 1983 Ex 6 2 7 12 3000 60 7 15 9000 7 20 4000 15670 7 23 Sales Discount 270 Sales returns and Allowances When you sell something A R xx Sales xx Cost of goods sold xx Inventory If something returned Sales xx Accounts receivable xx Inventory xx Cost of goods sold xx Sales Gross Amount Less Contra revenues Credit card fees Sales discounts Sales returns and allowances Net Sales Gross Profit Percentage Gross Profit Net Sales Bad debt Result from credit customers who will not y the amount they owe regardless of collection efforts Matching principle adjusting journal entry Bad debt expense E SE Allowance for doubtful accounts XA A Accounts receivable Allowance for doubtful Accounts Net realizable value for receivable accounts Writing off specific uncollectable accounts Allowance for doubtful account Accounts receivable Ps 312 ex E6 8 a Bad debt expense 8000 Allowance for doubtful accounts 8000 b Allowance for doubtful accounts 2500 Accounts receivable 2500 6 9 a Bad debt expense 15 800 Allowance for doubtful accounts 15 800 b Allowance for doubtful accounts 360 Accounts receivable 360