Principles Of Accounting(会计学原理)Chapter_05.ppt

* Purchase discount terms are typically written as this slide shows. This particular discount term would be read as “two ten net thirty.” The first number represents the discount percentage. The second number represents the discount period. The letter “n” stands for the word net. The last number represents the entire credit period. In this case, if the customer pays within 10 days, then a 2% discount may be taken. If not, then all of the amount is due within 30 days. * Now, let’s see how a purchase discount works. On November 2nd, Z-Mart purchased $1,200 of merchandise inventory on account, credit terms are 2/10, n/30. In this entry we debit Merchandise Inventory and credit Accounts Payable for $1,200. * If Z-Mart pays the account within the discount period, the amount would qualify for the discount of 2% because it is within the ten-day discount period. In this entry, the entire Accounts Payable of $1,200 is paid off with a cash payment of $1,176. The difference of $24 is the purchase discount, and it is recorded as a reduction in the cost of the Merchandise Inventory. * If we look at the accounts after posting the payment entry, we can see that the current balance in Accounts Payable is zero, indicating that the total liability has been satisfied. We can also see that the current balance of $1,176 in the Merchandise Inventory account reflects the actual cash price of the merchandise purchased. * In addition to purchase discounts, merchandisers also have to deal with returns of inventory and allowances. A purchase return is the return of merchandise by the purchaser to the supplier. An allowance is a price reduction granted to the customer because of some quality issue. An allowance may be given because of a slight defect in the merchandise or because a shipment was late. In these cases, the customer keeps the merchandise and just receives a price reduction as the allowance. * Let’s look at an example and see how purchase returns and allowances are recorded