What I Know Chart
Sales return is the return of Describe at least one
products or commodities difference between Sales
by customers to the seller,
as the result of many
reasons, but usually within
some agreed time period
and due to the condition of
the product and customer’s
satisfaction. This sales
return is account differently
from the seller and buyer
perspective.
Once the buyer identifies
any kinds of problems, the
buyer will normally need to
return the goods back and
then asking for returning
cash or reducing the credit
balance. In other words,
the account payable in
the buyers’ book is
reduced. On the other
hand, sales discount is a
reduction in the price of a
product or service that is
offered by the seller, in
exchange for early
payment by the buyer. A
sales discount may be
offered when the seller is
short of cash, or if it wants
to reduce the recorded
amount of its receivables
outstanding for other
reasons. If a customer
takes advantage of these
terms and pays less than
the full amount of an
invoice, the seller records
the discount as a debit to
the sales discounts
account and a credit to
the accounts receivable
account.
Questions: What I Learned
I learned that the contra
revenue accounts
Returns and Sales commonly used in small-
Discounts. business accounting
include sales returns, sales
allowance and sale
discounts. A contra
revenue account carries a
debit balance and reduces
the total amount of a
company’s revenue. The
amount of gross revenue
minus the amount
recorded in the contra
revenue accounts equal a
company’s net revenue. A
transaction is made under
the sales return account
when a customer returns a
product to the company for
a refund. Sales allowance
represents discounts given
to customers to entice
them to keep products
instead of returning them,
such as with slightly
defective items. The sales
discount account
represents the discount
amount a company gives
to customers as an
incentive to purchase its
products or services.
Cash discounts refer to an
incentive that a seller
offers to a buyer in return
for paying a bill before the
scheduled due date. In a
cash discount, the seller
will usually reduce the
amount that the buyer
owes by a small
percentage.
FOB shipping point, also
known as FOB origin,
indicates that the title and
responsibility of goods
transfer from the seller to
the buyer when the goods
are placed on a delivery
vehicle.
What is cash discount? I learned that Cash
discounts are deductions
allowed by some sellers of
goods, or by some
providers of services, to
motivate customers to pay
their bills within a specified
time. Cash discount gives
a seller access to her cash
sooner than if she didn’t
offer the discount.
Cash discounts also are
called early payment
discounts.
What is FOB Shipping I learned that since FOB
point? shipping point transfers the
title of the shipment of
goods when the goods are
placed at the shipping
point, the legal title of
those goods is transferred
to the buyer. Therefore,
the seller is not
responsible for the goods
during delivery. FOB
shipping point is a further
limitation or condition to
FOB, as responsibility
changes hands at the
seller’s shipping dock.