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Finacial Accounting
ACCU201 Chapter 6
15
Accounting
Undergraduate 2
10/31/2006

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Term
 Net Sales
Definition
 Sales revenue - sales returns and allowances - sales discounts - credit card discounts = net sales
Term
 Journal Entry: store cc sales \$3,000 w/ 3% cc service fee
Definition
 debit: A/R - 2910, CC Discounts 90, credit: sales revenue - 3000
Term
 journal entry: sale 1,000 on store credit, terms 2/10, n/30
Definition
 debit: A/R-1000,creit: sales revenue-1000
Term
 journal entry: customer pays that purchase 6 days later in cash
Definition
 debit: cash - 980, sales discount - 20,credit: A/R - 1000
Term
 journal entry: return for 500 on A/R
Definition
 debit: sales returns and allowances 500, credit: A/R 500
Term
 gross profit percentage
Definition
 = gross profit / net sales
Term
 journal entry: Gucci estimated bad debt expense for 2006 to be 3,000,000
Definition
 Dec. 31 - debit: bad debt expense 3000000credit: ADA 3000000
Term
 to adjust A/R... to amount business expects to collect
Definition
 A/R - ADA = Net A/R
Term
 journal entry: Gucci's total write offs for 2006 were 1000000
Definition
 Debit: ADA Credit: A/R
Term
 methods for extimating bad debts
Definition
 percentage of credit sales, or againg of A/R
Term
 percentage of credit sales
Definition
 net credit sales * estimated uncollectable = amount of journal entry
Term
 journal entry: estimated bad debts expense based on percentage of credit card sales of 100\$
Definition
 Dec 31: Debit: Bad Debt Expense - 100 Credit: ADA - 100
Term
 Aging of A/R
Definition
 A/R * estimated uncollectable = desired balance in ADA (- ADA credit balance + ADA debit balance) = amount of journal entry
Term
 so if your estimate for uncollectible accounts is 100, and there is already a 10 credit balance in your ADA, then what is your adjusting entry?
Definition
 100 desired bal - 10 credit bal = 90 adj entry Dec 31: Debit: Bad Debt Expense - 90 Credit: ADA - 90
Term
 recievables turnover ratio
Definition
 measures how many times avg A/R are recorded and collected in a year Recievables turnover = net sales / avg net trade recievables
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