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Financial Assgnment One
Financial Assgnment One
WATER INSTITUTE
ASSIGNMENT 1
To explain the following and how they are treated in the financial statement;
i. sales return
ii. purchase return
iii. carriage inwards
iv. carriage outwards
v. discount received
vi. discount allowable
I. Sales Return
Sales return refers to goods that customers have returned to the business after a sale.
Treatment:
Sales returns are deducted from the total sales figure on the income statement to arrive at
net sales.
The accounting entry would involve reducing both the sales revenue account and the
accounts receivable (if the sale was on credit).
II. Purchase Return
Purchase return refers to goods that a business has returned to its suppliers.
Purchase returns are deducted from the total purchases figure on the income statement to
arrive at net purchases.
The accounting entry involves reducing both the purchases account and the accounts
payable (if the purchase was on credit).
III. Carriage Inwards
Carriage inwards refers to the cost of transporting goods from the supplier to the buyer's
location.
Treatment:
Carriage outwards refers to the cost of transporting goods from the buyer's location to the
customer.
Treatment:
Discount received refers to a reduction in the selling price granted by a supplier to the buyer for
early payment or other reasons.
Treatment:
Discount allowable refers to a reduction in the purchase price granted by a buyer to the supplier
for early payment or other reasons.
Treatment: