Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 5: Q5-10RQ (page 294)

What is a purchase return? How does a purchase allowance differ from a purchase return?

Short Answer

Expert verified

Purchase returns are the service provided to the customers to return the goods bought from the seller.

Purchase allowances are the additional incentives granted by a business to the purchasers.

Step by step solution

01

Meaning of Purchase

In accounting, the term “purchase” refers to the acquisition of goods or services for a fixed consideration that is meant to be resold and help in generating the revenues for a business concern.

02

Meaning of purchase return and the difference between a purchase return and a purchase allowance

Purchase returns refer to the facility provided by the businesses to their customers for returning the purchased goods due to any damage, defect, or any other reason.

On the other hand, purchase allowances are the additional incentives allowed by a business to a buyer to keep the goods that are not “as ordered.”

Both purchase returns and purchase allowances decrease the cost of goods soldof a business concern.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Clink Electric uses the periodic inventory system. Clink reported the following selected amounts at May 31, 2018:

Merchandise Inventory, June 1, 2017 \( 16,000 Freight In \) 6,000

Merchandise Inventory, May 31, 2018 21,500 Net Sales Revenue 138,000

Purchases 81,000 Common Stock 32,000

Purchase Discounts 3,000 Retained Earnings 17,000

Purchase Returns and Allowances 6,600

Compute the following for Clink:

a. Cost of goods sold.

b. Gross profit.

Consider the following transactions for Burlington Drug Store:

Feb. 2 Burlington buys \(23,800 worth of inventory on account with credit terms of 2/15, n/30, FOB shipping point.

4 Burlington pays a \)50 freight charge.

9 Burlington returns $5,200 of the merchandise due to damage during shipment.

14 Burlington paid the amount due, less return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Burlington Drug Store?

Click Computers has the following transactions in July related to the sale of merchandise inventory.

July 12 Sold computers on account for \(8,000 to a customer, terms 3/15, n/30. The cost of the computers is \)4,800.

26 Received payment from the customer on the balance due.

Journalize the sales transactions for Click Computers assuming the company uses the perpetual inventory system.

When recording purchase returns and purchase allowances under the periodic inventory system, what account is used?

Click Computers’ Merchandise Inventory account at year-end is showing a balance of \(43,000. The physical count of inventory came up with \)42,500. Journalize the adjusting entry needed to account for the inventory shrinkage. The company uses the perpetual inventory system.
See all solutions

Recommended explanations on Business Studies Textbooks

Managerial Economics

Read Explanation

Strategic Analysis

Read Explanation

Human Resources

Read Explanation

Change Management

Read Explanation

Nature of Business

Read Explanation

Introduction to Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free