Asked by Daniel Yoshuvayev on May 09, 2024
Verified
Either the gross method or net method may be used to record sales with cash discounts,but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.
Net Method
A way of recording purchases or sales of goods that directly factors in any discounts or allowances at the time of the transaction.
Gross Method
An accounting method for recording purchases at the full invoice price without deducting any cash discounts offered.
Cash Discounts
A reduction in the amount owed by a customer if payment is made within a specified time frame.
- Learn about the discrepancies between the net method and the gross method for recording transactions involving purchases and sales.
- Identify and calculate key financial indicators such as gross profit, cost of goods sold, and sales discounts.
Verified Answer
VV
Victor ValenzuelaMay 15, 2024
Final Answer :
False
Explanation :
The net method does not require a period-end adjusting entry to estimate expected future sales discounts taken; instead, it records sales at the net amount, assuming the discount will be taken, and adjustments are made if the discount is not taken.
Learning Objectives
- Learn about the discrepancies between the net method and the gross method for recording transactions involving purchases and sales.
- Identify and calculate key financial indicators such as gross profit, cost of goods sold, and sales discounts.