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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.

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Most popular questions from this chapter

Jeana’s Furniture’s unadjusted Merchandise Inventory account at year-end is \(69,000. The physical count of inventory came up with a total of \)67,600. Journalize the adjusting entry needed to account for inventory shrinkage.

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

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.

3 Return of \)4,000 of the computers to the vendor.

9 Payment made on the account.

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

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

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.

3 Return of \)4,000 of the computers to the vendor.

9 Payment made on the account.

12 Sold computers on account for $8,000 to a customer, terms 3/15, n/30.

26 Received payment from customer on balance due.

Journalize the transactions for Click Computers assuming that the company uses the periodic inventory system.

Describe the calculation of cost of goods sold when using the periodic inventory system.

The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:
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