TAILIEUCHUNG - Lecture Financial accounting: Chapter 6 - Robert Libby, Patricia A. Libby, Daniel G. Short
Chapter 6 - Reporting and interpreting sales revenue, receivables and cash. After studying this chapter, you should be able to: Apply the revenue principle to determine the accepted time to record sales revenue for typical retailers, wholesalers, manufacturers, and service companies; analyze the impact of credit card sales, sales discounts, and sales returns on the amounts reported as net sales; analyze and interpret the gross profit percentage;. | Reporting and Interpreting Sales Revenue, Receivables, and Cash Chapter 6 Chapter 6: Reporting and Interpreting Sales Revenue, Receivables and Cash Accounting for Sales Revenue The revenue principle requires that revenues be recorded when earned. Goods or services have been delivered. Collection is reasonably assured. Price is fixed or determinable. There is persuasive evidence of a customer payment arrangement The revenue principle requires that revenues be recorded when earned. delivery has occurred or services have been rendered, there is persuasive evidence of an arrangement for customer payment, the price is fixed or determinable, and collection is reasonably assured). Revenues are considered to be earned when the following conditions are met: 1. Goods have been delivered or services have been rendered. 2. There is persuasive evidence of an arrangement for customer payment. 3. The price for the goods or services is known. 4. Collection from the customer is reasonably assured. Reporting Net Sales Companies record credit card discounts, sales discounts, and sales returns and allowances separately to allow management to monitor these transactions. Companies record credit card discounts, sales discounts, and sales returns and allowances separately to allow management to monitor these transactions. Credit card discounts, sales discounts, and sales returns and allowances are contra-revenue accounts, deducted from sales revenue in the income statement to arrive at net sales. Accounting for Bad Debts Bad debts result from credit customers who will not pay the amount they owe, regardless of collection efforts. Matching Principle Bad Debt Expense Sales Revenue Record in same accounting period. Most businesses record an estimate of the bad debt expense with an adjusting entry at the end of the accounting period. Businesses extend credit to customers to stimulate sales, but credit sales are not without costs. Some customers may be unwilling or unable to .
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