Account Receivable.docx

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Business Administration
Business Administration 2257

ACCOUNT RECEIVABLECHAPTER 5 MERCHANDISING OPERATIONSRECORDING SALES MERCHANDISESales revenue is recorded when earned for merchandising company it is earned when ownership transfers from buyer to seller How is this different Before we would sell services increase cash increase revenue now since our inventory which was an asset is being used to create revenue it becomes expense COGSRemember THIS IS ALL ASSUMING YOU ARE SELLING SHIT NOT BUYING SHITSales Purchases two steps o Cash or ARsales revenue COGSMerch InventorySales Taxes some of the revenue goes towards TAXES which is a liability account AP to governmentFreight Cost some of revenue goes towards FREIGHT EXPENSE only if it is FOB destinationReturns and Allowances basically an anti sale o Cash or AR sales revenue returns and allowances Contra Revenue COGSMerch InventoryDiscount companies promise to give discount if you pay quickly ie 210 n30oFirst you record the sale and then you make adjusting entryo AR 50Sales Revenue 50 by the same amount COGS 40Merch Inventory 40 by the same amountoIf paid within 10 days AR 50Cash 49Sales Discount 1 Sales discount is ContraRevenueoIf paid after 10 days AR 50Cash 50On income statementGross SalesLess Sales Discounts
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