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In october 2006 Utland sold some goods on sale or return terms for 2500 $/ Their cost to Utland was 1500$. The transaction has been treated as a credit sale in Utland`s financial statements for the year ended 31 oct 2006/ In nov 2006 the customer accepted half of the goods and returned the other half in good condition
What adgustments should be made to the financial statements. ?A) Sales and receivables should be reduced by 2500$ ? and cloth inventory increased by 1500$
B) Sales and receivables should be reduced by 1250$ ? and cloth inventory increased by 1500$the answer is A. why? customer sends back the half of goods, so it happens sales return. half of goods is 1250$. do we not should reduce the TR and Sales at 1250 $ ??
and also what does
sale or returnterms means?With sale or return, you lend goods to the customer to inspect – they then either return them because they do not want them, or they tell you they want to buy them.
The sale is only made when the customer tells you that they want to buy.Here the customer did not accept the goods until November. So at 31 October no sale at all had been made.
Therefore the whole sale needs removing from sales, and all of the goods need to be including in closing inventory.but here it is not said customer returned back all goods, customer sent back half of goods, and baught another half. it means sales happened. is it not right?
But as I wrote, the customer did not say he was buying any until November.
So at 31 October there had been no sale ( and the accounts are being prepared at 31 October )
haa ok. now i understood completely. i did not pay attention to the date. thank you
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