MINISTRY OF WATER

WATER INSTITUTE

DEPERTMENT OF WATER SUPPLY AND IRRIGATION ENGINERING.

COURSE: WATER RESOURCES AND IRRIGATION ENGINEERING
ACADEMIC YEAR 2023/2024
NTA LEVEL 8

MODULE CODE: WRU08104

MODULE NAME: FINANCIAL MANAGEMENT
STUDENT NAME: FREDRICK ROGERS
REGISTRATION NUMBER: BD/2020/WRIE 321

ASSIGNMENT 1
To explain the following and how they are treated in the financial statement;

i. sales return
ii. purchase return
iii. carriage inwards
iv. carriage outwards
v. discount received
vi. discount allowable

I. Sales Return

Sales return refers to goods that customers have returned to the business after a sale.

Treatment:

 Sales returns are deducted from the total sales figure on the income statement to arrive at
net sales.
 The accounting entry would involve reducing both the sales revenue account and the
accounts receivable (if the sale was on credit).
II. Purchase Return

Purchase return refers to goods that a business has returned to its suppliers.

Treatment: In financial statement

 Purchase returns are deducted from the total purchases figure on the income statement to
arrive at net purchases.
 The accounting entry involves reducing both the purchases account and the accounts
payable (if the purchase was on credit).
III. Carriage Inwards

Carriage inwards refers to the cost of transporting goods from the supplier to the buyer's
location.
Treatment:

 Carriage inwards is considered a part of the cost of goods purchased.

 It is added to the cost of inventory and included in the cost of goods sold (COGS) when
the goods are sold.
 The accounting entry involves increasing the inventory account.

IV. Carriage Outwards

Carriage outwards refers to the cost of transporting goods from the buyer's location to the
customer.

Treatment:

 Carriage outwards is considered a selling expense.

 It is recorded as an operating expense on the income statement.
 The accounting entry involves increasing the selling and distribution expense account.
V. Discount Received

Discount received refers to a reduction in the selling price granted by a supplier to the buyer for
early payment or other reasons.

Treatment:

 Discount received is typically treated as a financial gain or other income.

 It is recorded on the income statement under non-operating income.
 The accounting entry involves increasing the cash or bank account.
VI. Discount Allowable

Discount allowable refers to a reduction in the purchase price granted by a buyer to the supplier
for early payment or other reasons.

Treatment:

 Discount allowable is treated as a reduction in the cost of goods purchased.

 It is deducted from the total purchases to arrive at net purchases.
 The accounting entry involves reducing the purchases account.