Are sales discounts reported as an expense
Definition of Sales Discounts 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 re
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What is a trade discount
Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based on each customer's volume or status. Note that trade discounts are different from early-payment discount
What should be the entry when goods are purchased at a
Definition of Goods Purchased at a Discount There are two common types of discounts for companies buying goods to resell: Trade discount Early payment discount Examples of Entries for Goods Purchased at a Discount Trade discount. Some suppliers have catalogs with prices before any discounts. Let'
What is a provision for discounts allowable
What is a provision for discounts allowable? The provision for discounts allowable is likely to be a balance sheet account that serves to reduce the asset account Accounts Receivable.The provision account's counter part (remember double entry accounting) is an income statement account, such as Sales Discounts or Discounts for xxx.. Let me give you an example from the meat industry.
How is a voucher used in accounts payable
How is a voucher used in accounts payable? Definition of Voucher. A voucher is often a prenumbered form used in the accounts payable department to standardize and enhance a company's internal control over payments to its vendors and service providers.. Example of a Voucher. You could think of the voucher used in accounts payable as a cover sheet to which necessary supporting documents and
What is the difference between an invoice and a voucher
What is the difference between an invoice and a voucher? Definition of an Invoice. An invoice received from a vendor is a billing for goods or services that it had provided. The vendor's invoice will include the quantities of the items provided, brief descriptions, unit prices, …
Why would someone buy a bond at a premium
Why would someone buy a bond at a premium? A person would buy a bond at a premium (pay more than its maturity value) because the bond's stated interest rate (and therefore its interest payments) are greater than those expected by the current bond market. It is also possible that a bond investor will have no choice. For example, if you wish to purchase a bond maturing in 8 years with a specific
What is the difference between dividends and interest
What is the difference between dividends and interest expense? Dividends are a distribution of a corporation's earnings to its stockholders. Dividends are not an expense of the corporation and, therefore, dividends do not reduce the corporation's net income or its taxable income. When a dividend of $100,000 is declared and paid, the corporation's cash is reduced by $100,000 and its retained
What is a contra revenue account
What is a contra revenue account? Definition of Contra Revenue Account. A contra revenue account is a revenue account that is expected to have a debit balance (instead of the usual credit balance).In other words, its expected balance is contrary to—or opposite of—the usual credit balance in a …
What is the difference between accounts payable and
What is the difference between accounts payable and accounts receivable? Definition of Accounts Payable. Accounts payable is a current liability account in which a company records the amounts it owes to suppliers or vendors for goods or services that it received on credit.. Definition of Accounts Receivable
What are accruals
What are accruals? Definition of Accruals. The accounting and bookkeeping term accruals refers to adjustments that must be made before a company's financial statements are issued. Accruals involve the following types of business transactions: expenses, losses, and liabilities that have been incurred but are not yet recorded in the accounts, and; revenues and assets that have been earned but
Where is a contingent liability recorded
Where is a contingent liability recorded? Recording a Contingent Liability. A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income statement, and 2) a liability on the balance sheet.. Disclosing a Contingent Liability. A loss contingency which is possible but not probable will not be recorded in the accounts
What is the difference between a contingent liability and
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability. A contingent liability is a potential liability (and a potential loss or potential expense). For a contingent liability to become an actual liability a future event must occur.
sales returns and allowances definition and meaning
sales returns and allowances definition. A contra revenue account that reports 1) merchandise returned by a customer, and 2) the allowances granted to a customer because the seller shipped improper or defective merchandise.
Bonds Payable Explanation AccountingCoach
Bonds are a form of long-term debt. You might think of a bond as an IOU issued by a corporation and purchased by an investor for cash. The corporation issuing the bond is borrowing money from an investor who becomes a lender and bondholder.
Calculating the Future Value of a Single Amount (FV
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How do I calculate the after-tax cost of debt
How do I calculate the after-tax cost of debt? Definition of After-Tax Cost of Debt. The after-tax cost of debt is the interest paid on the debt minus the income tax savings as the result of deducting the interest expense on the company's income tax return.. Example of After-Tax Cost of Debt
Multiple-Step Income Statement AccountingCoach
Multiple-Step Income Statement. An alternative to the single-step income statement is the multiple-step income statement, because it uses multiple subtractions in computing the net income shown on the bottom line.. The multiple-step profit and loss statement segregates the operating revenues and operating expenses from the nonoperating revenues, nonoperating expenses, gains, and losses.