A projection or estimate of the future quantities and selling prices of products and/or services.
A projection or estimate of the future quantities and selling prices of products and/or services.
A revenue account that reports the sales of merchandise. Sales are reported in the accounting period in which title to the merchandise was transferred from the seller to the buyer.
to a company that will resell the goods) and is typically a percentage of the selling prices. The seller must file a sales tax report and remit the sales taxes it had collected. Basically, the company making the sale...
, etc. At the time of the sale, the seller will debit Accounts Receivable and will credit Sales. When the seller receives payment from the customer, the seller will debit Cash and will credit Accounts Receivable. Example...
Sales made on account. Sales where the customer is allowed to pay at a later date. Noncash sales.
What is net sales? Author: Harold Averkamp, CPA, MBA Definition of Net Sales Under the accrual basis of accounting, net sales is the total amount of goods shipped/delivered to customers during a specified period of...
A contra revenue account that reports 1) merchandise returned by a customer, and 2) the allowances granted to a customer because the seller shipped improper or defective merchandise. This of course will reduce the...
A special or specialized journal to record sales of merchandise to customers. In a manual system this saves a significant amount of recording time. In today’s computerized environment, sales are recorded...
This indicates (on average) how many days it takes to sell the merchandise held in inventory. To learn more, see Explanation of Financial Ratios.
What are sales discounts? Author: Harold Averkamp, CPA, MBA Definition of Sales Discounts Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated...
What is sales mix? Author: Harold Averkamp, CPA, MBA Definition of Sales Mix Sales mix is the relative proportion or ratio of a business’s products that are sold. Sales mix is important because a company’s products...
Sales before deducting sales returns, sales allowances, and sales discounts.
Why are sales a credit? Author: Harold Averkamp, CPA, MBA Definition of Sales In accounting, sales are revenues earned when a company transfers ownership of its goods to its customers. Under the accrual basis or method...
A selling expense account shown on the income statement in order to match this expense to the related sales.
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
What is the cost of sales? Author: Harold Averkamp, CPA, MBA Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost...
The net amount of gross sales on credit minus the sales returns, sales allowances, and sales discounts which pertain to the sales on credit.
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
What are sales taxes? Author: Harold Averkamp, CPA, MBA In the United States, most of its 50 States assess a sales tax, which is a tax on sales to the end user. For example, in the state of Wisconsin a retailer must...
Merchandise that was returned to the seller by a customer. This account is a contra sales account. When merchandise sold on credit is returned, this account is debited and Accounts Receivable is credited.
Net sales is the gross amount of Sales minus Sales Returns and Allowances, and Sales Discounts for the time interval indicated on the income statement.
See sales.
counters, company car, etc.), the amount received is not recorded as a sale. (Instead, the company will report this transaction on its income statement as a gain or loss on the disposal of an asset.) Example of Sales...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
See cost of goods sold.
What are gross sales? Author: Harold Averkamp, CPA, MBA Definition of Gross Sales Gross sales are the amounts a company earned from selling its products. The amounts originate from the company’s sales invoices but the...
that will be credited for Purchase Returns and Allowances and for Purchase Discounts.) When a company uses the perpetual inventory system, the general ledger account Inventory is continually being updated for all the...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
Are sales discounts reported as an expense? Author: Harold Averkamp, CPA, MBA Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales...
What is the definition of net sales? Author: Harold Averkamp, CPA, MBA Definition of Net Sales Net sales is a company’s gross sales of products minus any sales discounts and sales returns and allowances. When a company...
Is sales tax an expense or a liability? Author: Harold Averkamp, CPA, MBA Definition of Sales Tax In the U.S., a sales tax is a state tax (and possibly an additional local tax) that is paid by the buyer at the time of...
The amount of rent that has been earned by the landlord or owner during the accounting period shown in the heading of the income statement, but it has not been received as of the last day of the accounting period.
in discounting cash flows are net present value and internal rate of return. While the discounted cash flow models are the ideal, I would also want to forecast or project the impact on the company’s future financial...
institution in the Mid-Atlantic region. I became a PRO user because I wanted to deepen my understanding of accounting concepts. I also wanted to be able to engage more effectively with financial counterparties at my...
What is the days' sales in inventory ratio? Author: Harold Averkamp, CPA, MBA Definition of Days’ Sales in Inventory The financial ratio days’ sales in inventory tells you the number of days it took a company to...
What is the days' sales in accounts receivable ratio? Author: Harold Averkamp, CPA, MBA Definition of Days’ Sales in Accounts Receivable The days’ sales in accounts receivable ratio (also known as the average...
Is the sale of a plant asset recorded in the sales account? Author: Harold Averkamp, CPA, MBA Definition of Sale of a Plant Asset The sale of a plant asset is often the disposal of a company’s equipment (or other...
Why not use Sales in the Inventory Turnover Ratio? Author: Harold Averkamp, CPA, MBA The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover...
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