Week 6 Notes
Week 6 Notes ACCT 2110 - 002
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This 3 page Class Notes was uploaded by Cheyenne Hunt on Sunday March 20, 2016. The Class Notes belongs to ACCT 2110 - 002 at Auburn University taught by Elizabeth Miller in Winter 2016. Since its upload, it has received 12 views. For similar materials see Principles of Financial Accounting in Accounting at Auburn University.
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Date Created: 03/20/16
Week 6 Notes Cash Controls: Journal Entries Petty Cash Funds Petty Cash 800 Cash 800 Non-Op Misc. Exp. 735 Cash Over and Short 5 Cash 740 Cash Over and Short Cash 13,724.21 Sales 13,729.87 Cash Over and Short 17.34 Bank Reconciliation Balance per bank= $15,640 Balance per company records= $12,951 + Deposits in transit $750 + Interest earned $80 - Outstanding checks $1,410 + Collection of note interest $2,575 $14,980 - Service charge $65 - NSF check $615 + Error correction $54 $14,980 Sales Discounts To encourage prompt payment, businesses may offer a sales discount to customers who purchase on account For the buyer, it is a reduction to the cost of the goods and services For the seller the cash is more quickly available and collection costs are reduced Sales invoices use a standard notation to state discount and credit terms o EX: The invoice of a seller who expects payment in 30 days and offers a 2% discount if payment is made within 10 days would bear the notation, “2/10, n/30” Most companies record the sales and the associated receivable at the gross pre- discount amount of the invoice, using the “gross method” When a discount is taken, the amount of the discount is recorded in a contra- revenue account called “sales discounts” EX 1: Mar 1 Ac. Rec. 10,000 Sales 10,000 11 Cash 9,800 Sales Disc. 200 Ac. Rec. 10,000 EX 2: May 5 Ac. Rec. 15,000 Sales 15,000 Cash 14,700 Sales Disc. 300 Ac. Rec. 15,000 Sales Returns and Allowances In these cases, a contra-revenue account called sales returns and allowances is used to record the price reduction Net sales revenue= sales revenue- sales returns and allowances- sale discounts EX 1: May 5 Ac. Rec. 15,000 Sales 15,000 7 Sales R/A 2,000 Ac. Rec. 2,000 15 Cash 12,740 Sales Disc. 260 Ac. Rec. 13,000 EX 2: May 5 Ac. Rec. 15,000 Sales 15,000 7 Sales R/A 2,000 Ac. Rec. 2,000 15 Cash 6,370 Sales Disc. 130 Ac. Rec. 6,500 25 Cash 6,500 Ac. Rec. 6,500 Types of Receivables Accounts v. Notes- notes receivables have interest earned Current v. Noncurrent- noncurrent are less liquid Trade v. Nontrade- nontrade do not involve inventory Uncollectible= bad debt expense
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