What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
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...
What is net sales? 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 time minus any early payment discounts...
What are gross sales? 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 total will be adjusted to the...
The net amount of gross sales on credit minus the sales returns, sales allowances, and sales discounts which pertain to the sales on credit.
-profit models. In other words, the planned sales mix is 20%, 50%, 30%. With this volume and sales mix the company is planning to have a small operating loss. Now let’s assume that the total units actually sold were...
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.
See cost of goods sold.
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.
A projection or estimate of the future quantities and selling prices of products and/or services.
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
on a vendor’s invoice before it is paid. 15. A vendor’s invoice of $800 has credit terms of 2/10, net 30. The amount to be remitted if the invoice is paid within 10 days is $__________. 16. If the terms of a...
will result in a larger loss on the owner’s cash Examples of Financial Leverage Mary uses $500,000 of her cash to purchase 40 acres of land with a total cost of $500,000. Mary is not using financial leverage. Sue uses...
book value to a lower amount? Select... Amortization expense Depreciation expense Extraordinary expense Impairment loss View Coaching In some industries (such as meat packing) the cost of the processing equipment is...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
containing each account’s unadjusted balance, Adjustments containing any adjusting entries, Adjusted Trial Balance containing the combination of the unadjusted balance and any adjustments, Income Statement containing...
to the readers of the balance sheet. However, if none of the coal has been delivered as of the balance sheet date, the utility company will not report a liability amount. Companies will often have some contingent...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold from the sale of inventory items...
For a retailer, wholesaler, and distributor the primary activities would be the buying of merchandise and then the sale of that merchandise. A manufacturer’s primary activities would be the production and sale of...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Is depreciation a direct or indirect cost? Definition of Depreciation Depreciation is defined as the systematic expensing of the cost of an asset such as equipment, building, vehicle, etc. over the useful life of the...
assets. Gain Right! Because the sale of equipment is outside of the main business activity and the amount received was greater than the amount at which the asset was carried in the company books, it is reported as a...
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...
Is sales tax an expense or a liability? Definition of Sales Tax In the U.S., a sales tax is a state tax (and possibly an additional city and/or county tax) that is paid by the buyer at the time of purchase. The sales tax...
What is the definition of net sales? 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 makes a sale, the general ledger...
Are sales discounts reported as an expense? Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
What is setup cost? Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded as a batch-level cost in activity...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. To learn more...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
This visual tutorial for the topic Income Statement presents the key components and formats used on a corporation's income statement (which is also known as the statement of operations or profit and loss statement)....
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
What is the significance of FOB Shipping Point and FOB Destination? Significance of FOB Shipping Point and FOB Destination The terms FOB shipping point and FOB destination have significance in accounting because they...
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