The correct answer is C. Balance Sheet. A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet. It is also known as Position Statement (as it shows financial position) or SRead more
The correct answer is C. Balance Sheet.
A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet.
It is also known as Position Statement (as it shows financial position) or Statement of Affairs (when it is prepared under the Single Entry System of accounting).
The balance sheet shows the assets and liabilities of a firm at any specific point in time. It is a summary of the assets held by a firm and the liabilities owed to outsiders.
As the name suggests, a balance sheet must always be balanced i.e, the total of assets should always be equal to the total of liabilities on any single day. To put it simply,
Assets = Liabilities + Capital
In the case of a sole proprietorship or partnership, capital means the amount invested by the proprietor/partners in the business. In the case of a company, capital means the funds contributed by the shareholders in the form of shares.
Here is a link for the official balance sheet format as per the Companies Act 2013 (page 260 of the pdf),
https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
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Net credit sales can be defined as the total sales made by a business on credit over a given period of time less the sales returns and allowances and discounts such as trade discounts. Net Credit Sales = Gross Credit Sales – Returns – Discounts – Allowances. Credit sales can be calculated from the ARead more
Net credit sales can be defined as the total sales made by a business on credit over a given period of time less the sales returns and allowances and discounts such as trade discounts.
Net Credit Sales = Gross Credit Sales – Returns – Discounts – Allowances.
Credit sales can be calculated from the Accounts receivable/ Bills Receivable/ Debtors figure in the Balance Sheet. It will be normally shown under the Current Assets head in the Balance Sheet.
Credit sales = Closing debtors + Receipts – Opening debtors.
Alternatively, you may observe the bills receivable ledger account to locate the figure of credit sales.
Net Credit Sales and related terms
Before we try to understand the concept of net credit sales with an example, let us discuss the term sales return. Sales return means the goods returned by the customer to the seller. It may be due to defects or any other reasons.
Now let us take an example. John is a retail businessman. He sells smartphones. He buys 100 smartphones from Vivo on credit. The smartphones are worth ₹1.5 lahks. He then returns smartphones worth 20,000 rupees to Vivo. He also gets an allowance of rupees 5,000 from Vivo.
In the above example, the credit sales of Vivo are of rupees 1.5 lakh. The net credit sales is of
1.5 lakh – 20,000 – 5, 000 = 1.25 lakh rupees.
Importance of Net Credit Sales
Advantages and Disadvantages of Credit Sales.
Advantages
Disadvantages
- Delay in Cash Collection – Credit Sales imply that the company would get cash on a delayed basis. This money could have otherwise been put to use for some other profitable venture or could have borne interest for the company
- Collection Expenses– The company had to incur additional expenditures for collecting money from debtors.
- Risk of Bad Debts – With credit sales, there is always the risk that the buyer may become bankrupt and may not be able to pay the money due to the seller.
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