What is the difference between a sales discount and a purchases discount?
The difference between the sales and purchase discounts is based on the person reporting the discount.
A discount can be defined as reducing the price of the product or service offered. It is reported as an expense by the seller and benefit by the buyer.
Sales discount is reported by the supplier as an expense because it reduces the benefits generated from the sales.
On the other hand, a purchase discount is reported by the buyer as income because it reduces the expenses of the business entity.
Income statement information for adidas Group, a German footwear, apparel, and accessories manufacturer, for the year ended December 31, 2014, follows. The company applies IFRS and reports its results in millions of euros. Prepare its calendar-year 2014 (1) multiple-step income statement and (2) single-step income statement.
Cost of sales
Income before taxes
Royalty and commission income
Other operating income
Other operating expenses
ProBuilder has the following June 30, 2016, fiscal-year-end unadjusted balances: Allowance for Sales Discounts, $0; and Accounts Receivable, $10,000. Of the $10,000 of receivables, $2,000 are within a 3% discount period, meaning that it expects buyers to take $60 in future discounts arising from this period’s sales.
a. Prepare the June 30, 2016, fiscal-year-end adjusting journal entry for future sales discounts.
b. Assume the same facts above and that there is a $10 fiscal-year-end unadjusted credit balance in the Allowance for Sales Discounts. Prepare the June 30, 2016, fiscal-year-end adjusting journal entry for future sales discounts.
94% of StudySmarter users get better grades.Sign up for free