1. Point 13 Sales Returns & Allowances, Discounts
Sometimes the merchandise is damaged; the merchandise is not what the buyer wanted.
At this time, the buyer will return the goods, or request a price reduction. So the seller will record this.

2. The seller will do these two entries: Dr. Sales returns and Allowances
Cr. Accounts Receivable
Dr. Merchandise Inventory
Cr. Cost of Goods Sold

3. ● For example ,On May 9, goods with
a selling price of $300 and a cost of $140 are returned and restored to inventory.
Sales Returns

4. Sales allowances
When seller grants customers a price reduction, the seller should do this entry:
The second entry is not required since the goods have not been returned.

5. Discounts The discount rates are the same as previous. (2/10,
Quantity discount
Sale is recorded at reduced price
No separate entry is made to record a quantity discount, too.
Sales discount
The discount rates are the same as previous. (2/10,
1/20,n/30)

6. Entry is made when payment is received.
Dr. Cash
Dr. Sales discounts ③
Cr. Accounts Receivable

7. ● In last Illustration, On May 14, Highpoint Electronic receives the correct payment from Chelsea Video.
Terms 2/10, n/30.
If the discount is not taken, Highpoint Electronic do the entry by $3,500 at the date of collection.

8. Illustration Record the transaction on the books of Junot Company:
On September 4, Junot Company sells merchandise for $1,500 on account to New Idea Company, terms 2/10, n/30, FOB shipping point.
The original cost of the merchandise to Junot Company was $800.
The correct company pays freight charges of $75 on September 5.
Dr. Accounts Receivable
Cr. Sales
Dr. Cost of Goods Sold
Cr. Merchandise Inventory

9. On September 8, goods with a selling price of $200 and a cost of $80 are returned and restored to inventory.
On September 14, Junot Company receives the correct payment from New Idea Company.
Dr. Sales Returns and Allowances 200
Cr. Accounts Receivable
Dr. Merchandise Inventory
Cr. Cost of Goods Sold
Dr. Cash ($1300 − $26)
Dr. Sales Discounts ($1300 × 2%)
Cr. Accounts Receivable ($1500 − $200)

10. Summary of Sales Transactions
1. Sale of goods
Dr. Cash or A/R
Cr. Sales
Dr. Cost of Goods Sold
Cr. Merchandise Inventory
2. Freight on sales (destination)
Dr. Freight Out
Cr. Cash or A/P
3. Sales taxes
Cr. GST Payable
4. Return of sold goods
Dr. Sales Returns and Allowances
Cr. Cash or A/R
Dr. Merchandise Inventory
Cr. Cost of Goods Sold
5. Cash received on account with a discount
Dr. Cash
Dr. Sales Discounts
Cr. Accounts Receivable
Sales PERPETUAL