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MERCHANDISE SALES

The following new accounts are used to record sales of merchandise to customers. Financial Statement Effect Income Balance Account Purpose Statement Sheet

Sales Used to record sales Increase revenue whenever a in net sale is made to a cash income or credit customer.

Sales Used to record a cash Decrease
Returns or credit refund given in net and to a customer who income
Allowances returns merchandise.

Sales Used to record Decrease
Discounts discounts granted to in sales a customer for paying and net an account receivable income within a discount period. (Example: 2/10, n/30)
(Continued)

MERCHANDISE SALES

(Concluded)

The following new accounts are used to record sales of merchandise to customers. Financial Statement Effect Income Balance Account Purpose Statement Sheet

Cost of Used to record the Decrease
Merchandise cost of inventory sold in net
Sold to customers. The income inventory items sold must be removed from the merchandise inventory account.

Sales Tax Used to record sales Increase
Payable tax collected by the in seller; these taxes liabilities must be paid to the appropriate tax authority. (Example: state or county)

Merchandise Used to record the Increase/
Inventory purchases (purchases Decrease returns)/ sales (sales of assets returns) of inventory

WRITING EXERCISE

Why would a retailer offer customers sales discounts?

How is using a separate account for sales returns and allowances useful to management?

If you owned a merchandising business, how would you decide which credit cards, if any, to accept?

Which of the following credit terms would be more generous to your customers: n/30 or n/eom?

FREIGHT TERMS

FOB FOB Shipping Point Destination…...

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