Accounting for retail operations Flashcards
(24 cards)
What are entries for purchases under a perpetual inventory system?
Credit purchase:
Inventory (asset) increase => Db
Account Payable (liabilities) increase => Cr
Cash purchase
Inventory (asset) increase => Db
Cash (asset) decrease => Cr
What are entries for purchases returns and allowances?
Credit purchase:
Account payable (liabilities) decrease => Db
Inventory (asset) decrease => Cr
Cash purchase (2 entries) Account receivable (asset) increase => Db Inventory (asset) decrease => Cr
Cash (asset) increase => Db Account receivable (asset) decrease => Cr
What is the definition of the term “purchase returns”?
The goods that purchaser receive may be damaged or inferior quality. In such cases, the purchaser may return the goods to the seller. The purchaser is granted credit if the sale was made on credit or cash refund if the purchase was for cash
What is the definition of the term “purchase allowances”?
The purchaser may choose to keep the defective goods if the seller is willing to grant an allowance from the purchase price. This is called purchase allowance
What is the meaning of the term “FOB Delivery point”?
FOB delivery point means that goods are placed free on board by the seller, and the buyer pays the freight cost
What is the meaning of the term “FOB destination”?
FOB destination means that the goods are placed free on board to the buyer’s place and the seller pays the freight
What is the entry to record “FOB destination”?
Freight in (expenses) increase => Db Cash (asset) decrease => Cr
What is the entry to record “FOB delivery”?
Freight-out/Delivery expenses (expenses) increase => Db
Cash (asset) decrease => Cr
What “discount received” means?
When the seller of goods grants a payment discount to a buyer, the amount of the granted payment is called “discount received” by the buyer
What is the entry to record a “discount received”?
No entry: 1
No accounts: 3
Account payable (liability) decrease => Db Cash (asset) decrease => Cr Discount received (income) increase => Cr
What is the entry for sales under a perpetual inventory system?
No entry: 2
No accounts: 4
Entry for recording the sales Account receivable (asset) increase => Db Sale (income) increase => Cr
Entry for cost of sales
Cost of sales (expenses) increase => Db
Inventory (asset) decrease => Cr
What is the entry to record credit/cash for returned goods that are not faulty or damaged?
No entry: 2
No accounts: 4
Sales returns and allowances (contra income) increase => Db Account receivable (asset) decrease => Cr
Inventory (asset) increase => Db
Cost of sales (expenses) decrease => Cr
What is the entry to record credit/cash for returned goods that are faulty or damaged?
No entry: 2
No accounts: 4
Sales returns and allowances (contra revenue) increase => Db Account receivable (assets) decrease => Cr
Inventory write down (expenses) increase => Db
Cost of sales (expenses) decrease => Cr
What is the nature of “Sales Returns and Allowances” account?
Sales Returns and Allowances is a contra revenue account. The normal balance of Sales Returns and Allowances is a debit
What are entries for sales discounts?
No entry: 1
No accounts: 3
Cash (asset) increase => Db Sales discounts (contra revenue) increase => Db Account Receivable (asset) decrease => Cr
What type of is the GST?
Indirect tax
What “taxable supplies” means?
Goods and services that attract a GST are referred to as taxable supplies
What are included in “GST-free supplies”?
Food, education, health services and exported goods
What are included in “Input taxed supplies”?
Input taxed supplies include financial services and residential rents
What is the entry to record GST paid when purchasing inventory?
No entry: 1
Accounts: 3
Account payable (liability) increase => Cr GST paid (asset) increase => Db Inventory (asset) increase => Db
What is the nature of “GST paid” account and why
GST Paid account represents an asset, a future economic benefit for the business, as this amount can be offset against any future GST
What is the entry to record GST collected when selling inventory?
No entry: 1
Accounts: 3
Account receivable (asset) increase => Db GST collected (liability) increase => Cr Sales (revenue) increase => Cr
What is the entry to record remitting GST to the ATO, If the amount GST paid not exceeds the amount GST collected?
No entry: 1
Account: 3
GST collected (liability) decrease => Db Cash (asset) increase => Cr GST paid (asset) decrease => Cr
What is the entry to record remitting GST to the ATO, If the amount GST paid exceeds the amount GST collected?
Cash (asset) increase => Db GST collected (liability) decrease => Db GST paid (asset) decrease => Cr
