Basic concepts of Accounting terms 3

Some important Terms of Accounting (Lecture 3)

In last post I have explained about the purchases, types of purchases, in this post I’ll will try to explain the term sales, and types of sales.

As we know that:

· Goods for Sale/Goods/ Merchandise

It includes all merchandise commodities which are purchased by the business for the purpose of selling.

There are four main types of merchandise at different stages of business.

Purchases

Cash purchase

Credit purchase or Purchase on Account

Purchases Returns

Sales

Cash sales

Credit Sales

Sales Returns

Ø Sales

As we know that good are purchased for the selling purposes. When these goods are sold to the customers at specific price, it is said that sales have been made.

Example

For example, John purchased goods worth Rs 5000 (our purchases). Suppose, these goods have been sold at a price of Rs. 6000 … In accounting language it will be said that sales have been made at Rs. 6000. So goods sold are called “Sales”

· Cash sales

If goods are sold to customers at a specific price and price of goods is received from them at the time of sale of goods, such sales are known as “Cash Sales”

Example

For example, Mr. A sold goods to a Customer, Mr. B for Rs. 2000 on 10^th January, 2009 and received the cash from him on the same date; it will be a case of “Cash sales”

· Credit Sales

If goods are sold to a customer and he does not pay the price of goods at the same time but agrees to make payment on some future date, the sales are called “Credit sales” or “Sales on account”.

Example

We sold goods to Mr. X for Rs. 3000 on 15^th January, 2005 and he agreed to make payment on 31^st January, 2005. It will be a case of credit sale or sales on account.

Ø Sales Returns or Returns Inwards

If a customer to whom goods have been sold finds that the goods are defective, unsatisfactory, below standard or not according to specification, he may return these goods to the seller, such return of the goods is known as “Sales Returns” or Returns Inwards” or “Returns from the customer”

In first three posts I have discussed about some important terms of accounting.

Please post your comments in comment section if there are some mistakes in the post or if you have some suggestions’ for its betterment.