Job Sheet #1 Practice in Purchase Returns and Allowances

ANALYZE.COMPUTE.WRITE

09.07.16

According to Win Ballada, a CPA and MBA, purchase returns and allowances are contra account and accordingly deducted from purchases in the income statement. It is important that a separate account be used to record purchases returns and allowances because management needs the information for decision making. She also said that cash discounts are discounts for prompt payment and it is composed of purchase discounts and sales discount. Purchase discount is a cash discount from the buyer's viewpoint. It has a discount period which means it is the period covered by the discount.