Question

Required: Describe each terms in detail 1. sales discounts 2. sales returns 3. sales allowance 4. account receivable 5.notes receivable 6. trade receivable 7.nontrade receivable 8. current receivable 9.noncurrent receivable

Answer 1

1. Sales discounts : It is a reduction in the price of the product offered by the seller to make the buyer make a early payment.

2. Sales return : when a buyer returns goods back to the seller it is known as sales return. Sales return may happen due to defective goods, excess quantity of goods shipped , late shipment of goods.

3. Sales allowance : it is the reduction in the price of the goods accepted by the buyer due to the goods being defective instead of returning them back to the seller.

4. Account receivable: is the amount of money the customers owes to the business due to the fact that goods have been delivered to them and used on credit for which the company did not receive any payment.

5. Notes receivable : is a promissory note to receive money in the future. It is usually on the current asset section of the balance sheet as it's life is less than a year.

6. Trade receivables : are bills issued to the customers for the goods and services delivered to them as a normal course of business operations.

7. Non trade receivables: are amounts due to entity other than the normal invoices sent to the customers as part of the normal business operations.

8. Current receivables: are accounts receivables which customers owe to the company for the credit purchases made by them.

9. Non current receivables: are promissory notes signed by the customers who owe amounts to the company and they have acknowledged their debts.