Concept explainers
Concept Introduction:
Perpetual Inventory system: This method records the inventory and the cost of goods sold continuously on the occurrence of a sale or a purchase transaction.
Gross Method: Under this method of accounting, sales are recorded at gross invoice value and if cash discount is availed by the customer, then
Credit terms: These are the agreed terms between the buyer and the seller and show the payment terms and the discount availed if the payment made timely, etc.
Discount period: Discount period is the period during which the cash discount is available and the purchaser needs to pay the net invoice price i.e., invoice amount less discount.
To Prepare: Journal entries for sales, sales return made and its receipt considering that the company using the gross method to record purchases and a perpetual inventory system.
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