Chapter 6 Flashcards
(5 cards)
What are the two Shipping Terms ?
Free on board shipping point and Free on board destination point.
When goods are shippedFOB (free on board) shipping point, title changes hands at shipment, and the buyer normally pays for shipping. Revenues from goods sold FOB shipping point are normally recognized at shipment.
When they are shippedFOB destination point, title changes hands on delivery, and the seller normally pays for shipping. Revenues from goods sold FOB destination point are normally recognized at delivery.
How are sales returns and allowances entries ?
Returns are often accumulated in a separate contra-revenue account (XR) calledsales returns and allowancesand must be deducted from gross sales revenue in determining net sales.
What is a note receivable ?
Notes receivable are written promises from another party to pay with specified terms. A note receivable usually contains the following information:
- Sum of money due (principal)
- Date the principal is due (maturity date)
- Interest rate and interest due dates
What is bad debt ?
Bad debts result from credit customers who will not pay the amount they owe, regardless of collection efforts.
What is the contra account to bad debt ?
Allowance for doubtful account
