Textbook Notes (363,283)
Canada (158,300)
MGAB01H3 (126)
Liang Chen (50)
Chapter 5.3

Chapter 5.3

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University of Toronto Scarborough
Financial Accounting
Liang Chen

Chapter 5.3 Recording Sales of Merchandise To comply with the revenue recognition principle, sales revenue is recorded when it is earned, just as service revenue is. Two entries are made for each sale in a perpetual inventory system. (1) DR cash or AR, CR sales (2) DR Costs of goods sold, CR Merchandise inventory. Sales Taxes Sales taxes are collected when goods are sold. They are not however a part of revenue. The company simply acts as a tax agent collector for the government and must be periodically remitted to the government. Freight Costs When the selling terms indicates FOB destination, the costs to transport the goods are debited to the operating expense account Freight out or delivery expense. Sales Returns and Allowances When customers are given discount or return goods, the seller will return cash or credit to
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