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Questions and Answers
What is the primary purpose of issuing a credit invoice?
What is the accounting entry that Masthead would make if a customer returns defective goods?
What type of invoice would Masthead issue if a customer wanted to return defective goods?
Why would a vendor issue a credit invoice to a customer?
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What is the result of a customer returning goods to a vendor?
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What is the purpose of a credit invoice in the context of a sales return?
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What would be the effect on the Vendor's financial statements if a customer returns goods?
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What is the journal entry that Masthead would make if a customer returns defective goods?
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What type of invoice would be issued by Masthead if a customer wants to return goods that are less than satisfactory?
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What is the purpose of a credit invoice in the context of a purchase return?
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Study Notes
Accounting Procedures for a Merchandising Business
- Freight-in Account records the charges for freight-in and delivery expense usually found on invoices from transportation companies
- Duty refers to special charges imposed by the government on certain imported goods, handled the same way as freight-in, debited to a Duty account
Recording Purchases and Sales
- Record purchases and sales of inventory, including freight-in, using a three-step process:
- Beginning Inventory is extended to the debit column of the income statement
- Ending Inventory (obtained by physical count) is entered in both the credit column of the income statement and debit column of the balance sheet
- Amounts for Freight-in and Purchases are transferred to the debit column of the income statement
Worksheet for a Merchandising Business
- The worksheet has three new merchandising accounts: Freight-in, Purchases, and Ending Inventory
- The worksheet helps prepare the income statement and balance sheet
Merchandise Returns and Allowances
- Some businesses require detailed information about returns and allowances to track what proportion of sales is returned by customers
- Returns and Allowances accounts are used to accumulate this information
- Merchandise Returns and Allowances are treated similarly to Purchase Returns and Allowances
- Revised Cost of Goods Formula is used to calculate the cost of goods sold
Credit Invoices
- A credit invoice is a "minus" invoice issued by the vendor to reverse a charge previously made
- Credit invoices are used to adjust, correct, or cancel a charge to a customer's account for defective goods, unsatisfactory goods, or errors on sales invoices
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Description
This quiz covers accounting procedures for a merchandising business, including freight-in and delivery expenses, and duties on imported goods.
