Accounting Question Thread

[eeps]

I thought I'd start a QUESTION thread... anyone feel free to ask any questions in relation to Accounting!

Does Sales Return have any effect on the Cash Flow Statement?.. I don't think so, but I'm just asking to clarify.

Thanks.

[nbalakers24]

nope they dont

[pooshwaltzer]

Careful there peeps.

Stock returns on pending trade accounts, ie. uncollected receivables provided on credit terms basis, have NIL cashflow effect. This would be considered more or less a purchase order adjustment. Provisional accruals are cashflow impertinent.

However, stock returns pertaining to customers having already settled their particular purchase invoices, ie. receipt issued for payment made, WILL definitely result in a cash outlfow event as additional transactional entries are created to avail a partial or even full reversal of prior entries.

[Fyrefly]

Careful there peeps.

Stock returns on pending trade accounts, ie. uncollected receivables provided on credit terms basis, have NIL cashflow effect. This would be considered more or less a purchase order adjustment. Provisional accruals are cashflow impertinent.

However, stock returns pertaining to customers having already settled their particular purchase invoices, ie. receipt issued for payment made, WILL definitely result in a cash outlfow event as additional transactional entries are created to avail a partial or even full reversal of prior entries.

VCE translation: it depends on whether it was a cash or credit sale, and (if it was a credit sale) whether or not the debtor has already paid his account.

Cash sale => Cash sales return
Credit sale, debtor already paid account => Cash sales return
Credit sale, debtor has not yet paid account => Credit sales return (read: non-cash transaction)

It would also depend on store/company policy.

There may be an assumption at VCE level that all sales returns fit in the last category... you'd have to ask your teacher that one though.

[eeps]

Careful there peeps.

Stock returns on pending trade accounts, ie. uncollected receivables provided on credit terms basis, have NIL cashflow effect. This would be considered more or less a purchase order adjustment. Provisional accruals are cashflow impertinent.

However, stock returns pertaining to customers having already settled their particular purchase invoices, ie. receipt issued for payment made, WILL definitely result in a cash outlfow event as additional transactional entries are created to avail a partial or even full reversal of prior entries.

VCE translation: it depends on whether it was a cash or credit sale, and (if it was a credit sale) whether or not the debtor has already paid his account.

Cash sale => Cash sales return
Credit sale, debtor already paid account => Cash sales return
Credit sale, debtor has not yet paid account => Credit sales return (read: non-cash transaction)

It would also depend on store/company policy.

There may be an assumption at VCE level that all sales returns fit in the last category... you'd have to ask your teacher that one though.

LOL. ok thanks for detailed answers! In short, Sales Returns have no effect on the Cash Flow Statement.

[Yitzi_K]

In VCE you only do purchase/sales returns relating to creditors/debtors respectively. So in any VCE question, a sales return will have no effect on the cash flow statement.

[Fyrefly]

LOL. ok thanks for detailed answers! In short, Sales Returns have no effect on the Cash Flow Statement.

Yes, but only based on this information:

In VCE you only do purchase/sales returns relating to creditors/debtors respectively. So in any VCE question, a sales return will have no effect on the cash flow statement.

In real-life accounting, they do often have a cash flow effect.

[mba]

In real-life accounting, they do often have a cash flow effect.

Haha yes, but we all know real life accounting is alot different then VCE accounting!

[huss48]

just want to know this question, how would u know if its an sales return or a purchase return??

[_avO]

just want to know this question, how would u know if its an sales return or a purchase return??

If there are two source documents given?
Then the one with your business name at the top is a sales return
The one with your business name in the middle is a purchase return

If there is a general journal entry?
Sales return consists of 6 affected accounts
DR Sales returns
DR GST Clearing
   CR Debtors control
   CR Debtor - Name
DR Stock control
   CR Cost of Sales

Purchase return only has 4 affected accounts
DR Creditors control
DR Creditor - Name
   CR Stock control
   CR GST Clearing

[eeps]

just want to know this question, how would u know if its an sales return or a purchase return??

Also, in a purchase return there wiil be an identified cost... that is, the amount of which the stock is bought at and the GST will be given in the question.

*the credit note must identify the cost price of the stock that is being returned.*

[_avO]

Sometimes the business can include some sort of mark up, say 70%, and may say as part of the extra info:
A customer returned stock and receive $1320 including 120 GST (CR. 002)

Then you may need to use the old formula SP = CP x (1 + Mark up)
                                                          CP = SP / (1 + Mark up) to find the cost price

So its not always that you will see the information there, but rather you need to interpret it and not misread important things like this

[eeps]

I've got another question.

Explain how prepaid revenue is classified in the Cash Flow Statement. Justify your response.

- Classification: Operating Inflow

- Explanation: ?

I know that's its an operating inflow, but I'm unsure as to how I would justify it. "It's classified as an Operating Inflow as it is a inflow of economic benefit, which as been received by the business but has yet to be earned..." :S (that was my initial response.)

Has anyone got any better, more detailed responses to the question?..

Thanks.

[kakar0t]

Prepaid revenue is a cash inflow consisting of revenue received but not yet earned. Under accrual accounting this amount cannot be recognised as revenue until the business fulfills their obligation. Nonetheless, it is a cash inflow associated with the businesses day-to-day activities and thus can be classified as an operating activity inflow.

thats how i would do it

[eeps]

Prepaid revenue is a cash inflow consisting of revenue received but not yet earned. Under accrual accounting this amount cannot be recognised as revenue until the business fulfills their obligation. Nonetheless, it is a cash inflow associated with the businesses day-to-day activities and thus can be classified as an operating activity inflow.

thats how i would do it

Thanks! great answer... much better than mine.