PART A: Recognizing Accounts Receivable Revenue Recognition Review from chapter 3 1. Provide a good or service 2. Collection is probable (being realized or realizable) The company will recognize the revenue at the agreed upon price, review from chapter 4. Accounts Receivables (A/R) (also called trade receivables)- arise from Credit Sales (providing a good or service and allowing the customer to pay later) also known as "sales on account." Recording a credit sale (review from chapter 2 and 3) Mow & Grow provides $500 of monthly lawn maintenance services for Customer A. Customer A does not pay at the time services are rendered. Accounts Receivable (A+) |500 Lawn Maintenance Revenue (R+àSE+) so0 Other Receivables-Nontrade receivables (less common) -tax refunds receivable -interest receivable -loans extended to others -Notes receivable (formal credit arrangement) Trade Discount-represents a reduction in price for products/services. The purpose of a trade discount is to increase sales (bulk purchases, etc.) or attract new customers. A trade discount is not an account (will not show on a financial statement). Sales discounts (Contra Revenue)–reduces the amount the customer owes the company if paid within a specific time period. The purpose of a sales discount is to encourage credit customers to pay early. Sales discounts only apply to credit sales. 2/10, n30 Practice:
PART A: Recognizing Accounts Receivable Revenue Recognition Review from chapter 3 1. Provide a good or service 2. Collection is probable (being realized or realizable) The company will recognize the revenue at the agreed upon price, review from chapter 4. Accounts Receivables (A/R) (also called trade receivables)- arise from Credit Sales (providing a good or service and allowing the customer to pay later) also known as "sales on account." Recording a credit sale (review from chapter 2 and 3) Mow & Grow provides $500 of monthly lawn maintenance services for Customer A. Customer A does not pay at the time services are rendered. Accounts Receivable (A+) |500 Lawn Maintenance Revenue (R+àSE+) so0 Other Receivables-Nontrade receivables (less common) -tax refunds receivable -interest receivable -loans extended to others -Notes receivable (formal credit arrangement) Trade Discount-represents a reduction in price for products/services. The purpose of a trade discount is to increase sales (bulk purchases, etc.) or attract new customers. A trade discount is not an account (will not show on a financial statement). Sales discounts (Contra Revenue)–reduces the amount the customer owes the company if paid within a specific time period. The purpose of a sales discount is to encourage credit customers to pay early. Sales discounts only apply to credit sales. 2/10, n30 Practice:
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 3MC: If a customer pays with a credit card and the service has been provided, which of the following...
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Question
From pages 5-1 and 5-2 of the VLN, which of the following is FALSE as it relates to a sales discount?
Group of answer choices
A. It is an incentive to credit customers (customers who purchased on account) to encourage them to pay their invoice early.
B. It is always recorded at the time of the sale.
C. It is a contra revenue.
D. It only applies to credit customers (customers who purchased on account).
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