210
Sales Allowances
Sales allowances are recorded in the same way as when
a perpetual inventory system is used. Referring to the
sales allowances example from the previous section,
recall that Tools 4U granted a $300 sales allowance
on January 18.The journal entry is recorded as shown
in Figure 7A.12 in a periodic inventory system.
Sales Discounts
Sales discounts are recorded in the same way as when
a perpetual inventory system is used. In our example,
the customer paid within the discount period and
received a $250 discount as shown in Figure 7A.13.
Net sales is determined by deducting sales returns and allowances and sales discounts from sales
revenue as follows:
$20,000 – $4,000 – $300 – $250 = $15,450
Journal
Page 1
date
2016
account title and explanation debit Credit
Jan 18 Sales Returns & Allowances
300
Accounts Receivable
300
Record sales allowance
____________
fIGuRe 7A.12
SALES RETURNS & ALLOWANCES
INCOME STATEMENT
GROSS PROFIT
OPERATING EXPENSES
SALES REVENUE
COST OF GOODS SOLD
BALANCE SHEET
CURRENT ASSETS
CASH
INVENTORY
ACCOUNTS
RECEIVABLE
PREPAID
EXPENSES
PROPERTY, PLANT
& EQUIPMENT
LONG-TERM
ASSETS
ACCOUNTS
PAYABLE
BANK LOAN
CURRENTLIABILITIES
UNEARNED
REVENUE
LONG-TERM
LIABILITIES
OWNER’S EQUITY
OWNER’S
CAPITAL
OPERATING INCOME
+ $300 DR
– $300 CR
SALES RETURNS & ALLOWANCES
INCOME STATEMENT
GROSS PROFIT
OPERATING EXPENSES
SALES REVENUE
COST OF GOODS SOLD
BALANCE SHEET
CURRENT ASSETS
CASH
INVENTORY
ACCOUNTS
RECEIVABLE
PREPAID
EXPENSES
PROPERTY, PLANT
& EQUIPMENT
LONG-TERM
ASSETS
ACCOUNTS
PAYABLE
BANK LOAN
CURRENTLIABILITIES
UNEARNED
REVENUE
LONG-TERM
LIABILITIES
OWNER’S EQUITY
OWNER’S
CAPITAL
OPERATING INCOME
+ $250 DR
+ $4,750 DR
– $5,000 CR
Journal
Page 1
date
2016
account title and explanation debit Credit
Jan 20 Cash
4,750
Sales Discounts
250
Accounts Receivable
5,000
Record collection less discount
____________
fIGuRe 7A.13
Inventory: Merchandising Transactions
Chapter 7
Appendix
