Question

In: Accounting

on statement for profit and loss . based on formula why sales have to less with...

on statement for profit and loss . based on formula why sales have to less with discount ? discount is under expenses right ?

Solutions

Expert Solution

A 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. The sales discounts account appears in the income statement and is a contra revenue account, which means that it offsets gross sales, resulting in a smaller net sales figure. The presentation of a sales discount in the income statement is:

Gross sales $xxx,xxx
Less: sales discounts (xxx,xxx)
Net sales $xxx,xxx

Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are deducted from gross sales to arrive at the company's net sales. Hence, the general ledger account Sales Discounts is a contra revenue account. Sales discounts are not reported as an expense

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Explain why the income statement can also be called a “profit-and-loss statement.” What exactly does the...
Explain why the income statement can also be called a “profit-and-loss statement.” What exactly does the word balance mean in the title of the balance sheet? Why do we balance the two halves?
Explain why the income statement can also be called a “profit-and-loss statement.” What exactly does the...
Explain why the income statement can also be called a “profit-and-loss statement.” What exactly does the word balance mean in the title of the balance sheet? Why do we balance the two halves? Your initial posting should be 250-500 words.
Explain the purpose and use of the Statement of profit or loss, Statement of changes in...
Explain the purpose and use of the Statement of profit or loss, Statement of changes in equity, Statement of financial position (also known as the Balance Sheet) and of the Statement of cash flows. Explain why the Statement of cash flows differs from the Statement of profit or loss (125 words).
The profit before tax, as reported in the statement of profit or loss and other comprehensive...
The profit before tax, as reported in the statement of profit or loss and other comprehensive income of Andreas Ltd for the year ended 30 June 2020, amounted to $85 000, including the following revenue and expense items: Rent revenue $4 500 Bad debts expense 6 000 Depreciation of plant 5 000 Annual leave expense Long service leave expense 2 500 3 500 Entertainment costs (non-deductible) 2 800 Depreciation of buildings (non-deductible) 800 Fines and penalties (non-deductible) 1 500 The...
The profit before tax, as reported in the Statement of Profit or Loss and Other Comprehensive...
The profit before tax, as reported in the Statement of Profit or Loss and Other Comprehensive Income of Diamond Ltd for the year ended 30 June 2019, amounted to $50,000 including the following revenue and expense items. June 2019 $ Interest revenue 4,000 Bad debts expense 4,000 Depreciation expense - plant 5,000 Annual Leave Expense 3,000 Long service leave expense 2,500 Fines and Penalties (non-deductible) 600 Depreciation expense - buildings (non-deductible) 1,000 Government grant (exempt from tax) 3,000 The Statement...
The profit before tax, as reported in the statement of profit and loss for Aileen Ltd...
The profit before tax, as reported in the statement of profit and loss for Aileen Ltd for the year ended 30 June 2020, amounted to $150,000, including the following revenue and expense items: Revenues Sales revenue $600,000 Interest revenue 60,000 Government grant 40,000 Expenses Cost of goods sold 300,000 Bad debts expense 8,000 Depreciation expense – equipment 6,000 Depreciation expense – plant 25,000 Research and development expense 51,000 Wages expense 120,000 Long service leave expense 40,000 The draft statement of...
You have developed the following analytical profit and loss statement for your company. It represents the...
You have developed the following analytical profit and loss statement for your company. It represents the most recent year’s operations, which ended yesterday. Sales $45,750,000 Variable costs 22,800,000 Revenue before fixed costs $ 22,950,000 Fixed costs 9,200,000 Earnings before interest and taxes (EBIT) 13,750,000 Interest expense 1,350,000 Earnings before taxes $ 12,400,000 Taxes (50%) 6,200,000 Net income $ 6,200,000 Required Your supervisor in the controller’s office has just handed you a memo asking for written responses to the following questions:...
Calculate the Marketing Return on Investment (MROI).   Profit and Loss Statement Income Net Sales $750,000,000 Cost...
Calculate the Marketing Return on Investment (MROI).   Profit and Loss Statement Income Net Sales $750,000,000 Cost of Goods Sold $300,000,000 Gross Margin $450,000,000 Marketing Expenses Sales Expenses $78,000,000 Promotional Expenses $34,000,000 $112,000,000 General and Administrative Expenses Marketing Salaries $12,000,000 Indirect Overhead $107,000,000 $119,000,000 Net Income before Taxes $219,000,000
Profit or Loss Account (Income Statement) of a business shows a net profit of 500,000. The...
Profit or Loss Account (Income Statement) of a business shows a net profit of 500,000. The owner of the business says, ‘Where is the money? My business does not have an increase in cash by $500,000 in the bank account. Where is the $500,000 profit? Required: Provide an explanation to the owner of the business about why net profit of a Profit or Loss Account (Income Statement) is not necessarily equal to the cash inflow. Your explanation must include two...
Statement of profit or loss and comprehensive income and statement of changes in equity. Determine whether...
Statement of profit or loss and comprehensive income and statement of changes in equity. Determine whether the following transactions would appear in the statement of profit or loss and other comprehensive income. If so explain how they would be disclosed. (a)A gain on foreign currency translation of $83 000. (b)As a result of a fall in share prices in a recession, directors decided to write down the value of the company’s investment, Shares in Pluto Ltd, by $80 000. (c)...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT