CASH DISCOUNT

It is a discount given to encourage

early payment of account.

Sales discount-is a cash discount

on the pointof view of seller.

Purchase discount-is a cash discount

on the point of view of the buyer.
NOEL A.BE8GONIA,CPA,MBA

CREDIT TERMS
It is the agreement between a seller and buyer that lists the timing
and amount of payments the buyer will make in the future.
Common examples of credit terms:
2o.in/30 -this means that a buyer can avail a discount of 2%
of the price due if they pay within 10 days.If not,the buyer wil
have to pay the full amount 30 days from the date of sales invoice.
30025630 this means that a buyer can avail a discount of
3% if they pay within 10 days,2%if they pay within 15 days,and
no discount if they pay within 30 days.
> 2/EOM , n /60) -the buyer may avail 2%discount jf they pay by
the end of the month.If not,they have to pay the full amount 60
days from the date of sales invoice.
 SALES DISCOUNTS
AdoboTrading sold merchandise with an invoice price of P15,000 with a
credit term gf( /10,n/ 30. —7
Accounts receivable - 15,000
Sales 15,000
To record sales on account.

If collected within the discount period:

Cash (P15.000 ×98%) 14,700
Sale discounts (P15.000x2%) 300
Accounts receivable 15,000

If collected after the discount period:

Cash 15,000
Accounts receivable 15,000
NOEI A,BERGONIA,CPA,MBA

COST OF GOODS SOLD

It is also known as the cost of sales.

Inventory,beginning —---- Xx It is the largest single expense of

Net Purchases ——— — XX a merchandising business.
Cost of Goods Available for Sale →XX
Inventory,ending (XX)
It represents the cost of an a merchandise sold
→ XX
Cost of Goods Sold — to a customer.
 INVENTORY SYSTEM

company determines the quantity of inventory on hand only periodically,as

the name implies
records all acquisitions of inventory during the accounting period by debiting

Periodic the Purchases account and for transportation cost by debiting Transportation-
in or Freight in
Purchase Returns and Allowances account are maintained for returns
and Purchase Discount account to record the cash discount availed by the

continuously tracks changes in the lnventory account.

a company records all purchases and sales (issued)of goods directly in the
Inventory account as they occur.

Perpetual Cost of goods sold is recorded at

Goods Sold and crediting Inventory
the time of each sale by debiting Cost of

The perpetual inventory system provides a continuous record of the balances in

both the Inventory account and the Cost of Goods Sold account

NOEA.BERGONIA.(PA.MBA

Purchases is an account used to record

all acquisitions of inventory during
the accounting period.

Purchase Returns and Allowances account

Purchases — XX is maintained for return of
Purchase returns and allowances — merchandise purchased.
(XX) Purchase discount
(XX) Purchase Discount account to record
the cash discount availed by the company.
Freight in xx
Net purchases - XX

Transportation-in or Freight-in is used

to record the transportation cost borne by
the buyer.

NOEL A.BERGONIA,CPA,MBA