Procesos operativos

The relationship that exists between sales and discounts depend on the nature of the transaction, either credit sales or cash sales. The relationships are explained below.

3.3.3.1 Credit sales

The discount available to those who buy on credit or the customer (Debtors) at point of sale is trade discount. The trade discount can be stated as a percentage of the sales price or a uniform amount that varies with sales value. Where trade discount is given on credit sales, the discount value will be deducted from the sales value in the invoice. The customer will owe the seller the sales value less the trade discount. It is the net price that will be recorded in the customer’s account.

3.3.3.2 Cash sales

As a matter of clarity, trade discount is not given on cash sales; hence, trade discount will be treated with credit sales as explained above. For cash sales, a customer could get cash discount and/or quantity discount. Quantity discount would have been deducted from the invoice leaving the net value which the customer is expected to pay immediately or at a given time. Cash discount can only be recognised when the customer settles his outstanding

invoices. Hence, cash discount is treated in accounting records when payment is received from the customer (Debtor). The book of account used for treating this is called three column cash book, which is discussed in unit 11.

Example of credit sales transactions that include discount is treated below.

Example 4:Abundant Blessing is a dealer in frozen foods and dairy products. His sales for the first week of June 2014 are as follows.

June 4. 4 cartons of Cray fish at N1,250 a carton to Jalingo.

7 cartons of shrimps to Gboko at N4,100 per carton.

2 cartons of Cray fish at N1,245 each to Gboko and he received 10% trade discount June 12. Ajayi bought 15 crates of white egg at N880 per crate and 3½ packets of prawns at

N7,200 a packet. A discount of 5% was given to him

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June 16. 6 cartons of Cray fish was sold to Debo for N7,440. He also bought 2 packets of prawns at N7,225 per packet and 5 cartons of shrimps at N4,150 a carton. Being an old customer, Abundant Blessing gave him 15% discount and this encourage him to buy a carton of white egg for N880 but this do not qualify for discount.

June 25. Ijeoma bought a carton each of Cray fish, prawn, white egg and shrimps at same price with Joshua, Ajayi, Debo and Gboko respectively. Being a woman with the ability to negotiate, she received 10% trade discount.

Prepare the sales day book for Abundant Blessing SUGGESTED SOLUTION TO EXAMPLE 4

Abundant Blessing

Sales Day Book For the month of June 2014

Date Particulars Details Amount (N) 4-6-2014 Jalingo

4 cartons of cray fish at N1,250 a

carton 5,000

4-6-2014 Gboko

7 cartons of shrimps at N4,100 per carton

2 cartons of cray fish at N1,245 each

Less 10% trade discount

28,700 2,490 31,190

3,119 28,071 12-6-2014 Ajayi

15 crates of white egg at N880 per crate

3½ packets of prawns at N7,200 a packet

Less discount of 5%

13,200 25,200

38,400

1,920 36,480

16-6-2014 Debo

6 cartons of cray fish

2 packets of prawns at N7,225 per packet

5 cartons of shrimps at N4,150 a carton

7,440 14,450 20,750 42,640

41 Less 15% discount

A carton of white egg

6,396 36,244

880 37,124 25-6-2014 Ijeoma

A carton of cray fish A carton of prawn A carton of white egg A carton of shrimps

Less 10% trade discount

1,250 7,200 880 4,100 13,430

1,343 12,087

Total sales for the month credit to

sales account 118,762

4.0 CONCLUSION

Source documents are important because the information contains there in are used in preparing the subsidiary books of account. Accountants rely on source documents to prepare the books of accounts. The source documents are first posted to the subsidiary books of account which include the sales day book, purchases journal, returns inwards journal and returns outwards day book.

SELF ASSESSMENT EXERCISE

1. List five source documents and explain their uses.

2. What is the relationship between sales and discount?

5.0 SUMMARY

In this unit, we explain source documents, uses of source documents, types of discount, the relationship between sales and discount, and how to prepare one of the subsidiary books of account, the sales day book with or without sales discount,

6.0 TUTOR-MARKED ASSIGNMENT

Question 1: Better Voice Communications deals with GSM Phones, Accessories, Recharge cards and Sims pack with head office located at Magboro. The sales for the month of May 2015 is as stated below:

1/5/15 Two Samsung T400 phone at N18,000 each to Leverage Computers. 40 packets of TNN recharge card at N2,000 per packet to Mr.Adeniran. 20 pieces of Nokia 2005 ear phone at N400 each to Mr.Adeniran and he received 10%

trade discount.

18/5/15 Funke bought 15 packs of VMT Sims pack atN550 a pack. 4 pieces of Trium 1900s at N10,500 each. Being an old customer, she received 12% discount

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which prompt her to buy 2 packets of NTN recharge card for N28,000 but this do not attract discount.

29/5/15 Mrs.Obinna bought one Bird 1010 phone for N11,340.

You are required to prepare the sales day book of Better Voice Communications for May 2015.