vce accounting unit 4. theories what is “credit note”? reasons for purchase and sales return;...
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VCE Accounting Unit 4
Theories What is “credit note”?Reasons for purchase and sales return;Principles relate to this chapter;Characteristics relate to this chapter;
Credit NotesThe business document used to acknowledge
that goods have been replaced or refunded by our clients.
(p 301)Figure 15.1 Credit NoteWholesale Trading Credit Note No. 3389123 Power Ave Date: 10/7/10
Credit: Elsternwick Electricals 898 Nepean Highway Reason: Damaged in Transit
Description Qty Unit Price
Subtotal GST Total
Lead light touch lamps 4 $42.50 $170.00 $17.00
$187.00
Approved by: Ken Sparkie
Creditor/supplier
Our business name
Reasons for ReturnWrong stocks have been delivered;Damaged products;Different products have been delivered.
Principles Reporting PeriodBecause we record the return of sales/purchase
when the credit notes are issued.
Historical Cost (IDL) original cost of stocks
characteristicsReliableRecord return of purchases/sales at their
original costs for the current reporting period.
Practical – recording and reportingSample exercise: p 311 - Ex 15.1-identify the useful information for recording
and reporting in credit notes;-distinguish the effects on Sales Return Purchase Return-Change to Profit and Loss Statement, Balance
Sheet.
Exercise 15.1Tran’s Toy Store
WHOLESALE TOY COMPANY No. 231199 Barbie RoadKensville 5025 date 28/6/2010
Credit: TRAN’S TOY SOTRE Reason: Incorrect colorDescription Qty Unit
PriceSubtotal
GST Total
Builder Blocks 10 $12.00 $120.00 $12.00
$132.00
Total (excluding GST) $120.00
Total GST $12.00
Total credit approved (including GST) $132.00
Answer(a) Credit Note(b) Wholesale Toy Company issued the
document.(c) Effects: our business returns stock (out)Key Terms Account Amount
Assets Stock Control-Decrease
$120 (no GST, only stock value)
Liabilities GST clearing- IncreaseCreditor Control-Decrease
$12
$132 (inc. GST)
Owner’s Equity - -
Extras for 15.1The Double entry will be recorded in Tran’s
Toy Store:
The Double Entry will be recorded in Wholesale Toy Company:
Ledger Account Dr/Cr Amount $
Stock Control Cr (decrease) $120
GST clearing Cr (increase) $12
Creditors Control Dr (decrease) $132
Ledger Account Dr/Cr Amount $
Sales Returns Dr (increase) $120
GST clearing Dr (decrease) $12
Debtors Control Cr (decrease) $132
Extra for 15.1Stock card for Tran’s Toy (purchase return in
stock card)-FIFO method does not apply here.
Stock Item: Builder BlocksValuation Method: FIFO
Date Details In Out BalanceQty Cos
tVal. Qty Cos
tVal. Qty Cos
tVal.
27/6/10
Inv. 78 210
1112
22120
319
1112
33228
28/6/10
Credit Note 231
10 12 120
39
1112
33108
Extra for 15.1Stock card for Wholesale Toy Company (sales
return in stock card)-FIFO method does apply here.
Stock Item: Builder BlocksValuation Method: FIFO
Date Details In Out BalanceQty Cos
tVal. Qty Cos
tVal. Qty Cos
tVal.
27/6/10
Inv. 78 210
1112
22120
10 13 130
28/6/10
Credit Note 231
10
12
120
1010
1213
120130
Extra for 15.1
Date
Details General ledger
Sub.ledger
Dr Cr Dr Cr 30/06
Creditors control
132
Wholesale Toy
132
Stock Control
120
GST clearing
12
Date
Details General ledger
Sub. ledger
Dr Cr Dr Cr30/06
Sales Return
120
GST clearing
12
Debtors Control
132
Tran’s Toy 132
Stock Control
120
Cost of sales
120
Tran’s Toy (purchase return)
Wholesale Toy (sales return)
Extra for 15.1Changes to accounting reports
Tran’s Toy Wholesale Toy
Profit and Loss Statement
Profit and Loss Statement
Nil Sales Revenue xxLess Sales Return 120Less Cost of goods sold ( 120)
Balance Sheet Balance sheet
Current Assets Stock Control 120
Current Liabilities Creditors Control 132 GST Clearing 12
Current Assets Stock Control 120 Debtors Control 132Current Liabilities GST Clearing 12Owner’s Equity ( sales return= COGS)
Working TimeCredit Notes: Ex 15.2, Return of sales: Ex 15.4Return of purchase: Ex 15.5 Comprehensive: Ex15.10Read Stock Cards: Ex 15.13, Ex 15.15Comprehensive: Ex 15.16