Learning Objective 5-2
1) An invoice is a request by the seller for payment from the purchaser.
2) An invoice is also known as a bill.
3) A purchase discount is the price offered by the purchaser for delaying the payment to the seller.
4) Credit terms of a merchandising company are: 1/15, net 40. This means that the buyer can receive a discount of one percent, if the invoice is paid within 40 days of the invoice date.
5) Nurix Inc. sold goods on credit terms n/20 to Jelly Harper Inc. This means no discounts are offered, and the amount of the invoice must be paid within 20 days from the date of invoice.
6) Defective, damaged, or otherwise unsuitable merchandise that is returned to the seller is referred to as purchase allowances by the purchaser.
7) If purchase allowances are granted, the buyer need not return the goods to the seller.
8) Freight in is to be recorded in the Merchandise Inventory account if the purchaser uses the perpetual inventory system.
9) The purchase discount amount is calculated on the amount of the invoice minus the returns and allowances.
10) Purchase discounts are calculated on the amount of the merchandise purchased including transportation costs.