Question

1.

What’s the difference when recording a sale on account “gross” versus “net.”

2.

Your company made a sale on account for $12,000. The terms were 2/10; n/30. Answer the

following:

a.

What do the “terms” as stated above mean?

b.

Make the appropriate journal entry to record the sale gross.

c.

Make the appropriate journal entry to record the sale net.

3.

What is the allowance for doubtful accounts?

4.

Describe the allowance method for writing off a specific account receivable.

5.

Your client just called their accountant (you). They have identified a customer account receivable

for $4,000 that should be written off (the company went bankrupt). The client asked how will

this write off impact their net income?

a.

Explain to your customer (and me) why there is no impact to net income.

b.

Why might you tell the customer that “eventually” there could be an indirect impact of

the $4,000 write-off on net income

Answer 1

As per policy only first four questions will be answered

Answer : 1

Gross sales are the total of all sale transactions recorded for a period, without any deductions like sales allowances, and sales discounts and sales returns wherever as net sales refers to gross sales minus deductions such as sales allowances, sales discounts and sales returns.

Answer :2 (A)

The term above indicates that the credit period is of 30 days. Customers are required to make payment within 30 days but they will be allowed 2% sales discount if they make payment within 10 days.

Answer: 2(B)

Account titles and explanation	debit	credit
Accounts receivable	12000
Sales		12000

Answer:2 (C)

Accounts title and explanation	debit	credit
Accounts receivable	12000
Sales		12000

(while recording sales will be same because sales discounts will be given at the time of payment. So entry will be the same for gross sales and net sales).