ACC 210 Lecture Notes - Lecture 5: Accounts Receivable, Income Statement

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A company"s total sales less any discounts, returns, and allowances. Net sales = sales - sales discounts - sales returns and allowances. Seller reduces the customer"s balance owed partially. Joe tells his dentist another dentist is offering the same procedure for so the dentist reduces joe"s account balance by a sales allowance. Debit sales returns & allowances for . The sales returns & allowances account is a contra-revenue account (a revenue account with a normal debit balance instead of the usual credit balance. Reduced from the amount owed by a credit customer. May be taken only if payment is made within a specified period of time (typically. Ex- 2/10, n/30 means a 2% discount is available if balance is paid within ten days, or the entire balance is due within 30 days. Ex: the dentist wants to encourage prompt payment so offers joe terms of 2/10, n/30. Must acknowledge the likelihood that some accounts will be uncollectible.

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