Question

1. Explain how to memorize an unrecorded bill entry transaction.

2. How a Sales Order different from a Sales Estimate?

3. Why do some companies require customers to pay a deposit when purchasing on account?

4. Why do some business make purchases with a credit card?

Answer 1

1.How to memorize an unrecorded bill entry transaction.

As per accounting principle revenue and cost are reported only when it is recognised as per revenue recognisition principle. But what about when sales are made for a year .

For an example a company made contract delivery of $300 IN Upcoming Month.

It will be recorded as asset in Balance sheet instead of P/L statement.

Entries will be :                         

Unearned Revenue :                  Debit ( 300)

Fees Earned :                                                       Credit (300)

Similiar treatment will be done for unearned expense also.

2. How a Sales Order different from a Sales Estimate?

Sales order is binding contract between buyer and seller. It consists details of purchase quantity , amount and specification related product. Here seller is legally obliged to deliver the said product.

Where sales Estimate is just a forecast of future sales amount by a company. It is done based on historical results majorly.

3. Why do some companies require customers to pay a deposit when purchasing on account?

It means customers require to pay upfront a full amount or percentage of amount. This may be due to

• Poor Credit record of customers.
• Company deals in high value goods.
• Highly customized product - company will not be able to sell other company if the customer do not accept delivery

4. Why do some business make purchases with a credit card?

Credit card provides Interest free credit facility for 30 - 45 days. It helps business save in interest cost.