The main use of computers is to process complicated information. Since computers are so beneficial and widespread, many businesses use computers as a management information system. This is a system of connected subsystems that provide the necessary information to run a business.
The accounting information system is without a doubt, the most important subsystem used because it is the key role in analyzing and managing the flow of financial data of a business.
It is important for both parties to know that when goods are sold, what are the price of the item and the timing of the payment.
It is also good to know what the stipulations are, if any, that apply to the return of merchandise.
Different companies quote their prices by using different methods.
A lot of merchants will generally quote the price that they would like to sell it.
On the other hand, some merchants such as manufacturers or wholesalers will usually quote their prices as a percentage of their catalogue prices, generally around 30 percent or more, and this reduction is known as a trade discount.
The terms of sales are usually on the sale invoice.
In a lot of industries, the payment is expected within a short time of the purchase.
In most industries, a discount is usually offered for an early payment.
This type of discount is called a sale discount which has the purposes for increasing a seller liquidly by reducing the amount of money associated with accounts receivable.
In some industries it is expected for the seller to pay for some charges, and in others, it may not.
One example is the freight.
Free on Board (FOB) shipping basically means that the buyer is paying for all the shipping expenses.
However, FOB destination is the opposite and means that the seller pays the shipping or transportation expenses once it is delivered.
A lot of retailers will give buyers the opportunity to charge the shipping expenses to third party service.
The five most used credit cards are American Express, Visa, MasterCard, Discover Card, and Diners Club.
The customer is given credit by the lender or credit card issuer and receives a card to charge their purchases to.
Once the seller accepts the card, the invoice is automatically prepared, and the seller receives money into their account.
If the seller is offering a discount, the discount is recorded as an expense to the seller.
The seller’s merchant also deducts money for each transaction, and that money that is deducted is also recorded as an expense.
Freight is the shipping costs that are associated with receiving merchandise and is generally included with the cost of goods sold.
A lot of companies like to include the cost of freight in with the cost of the merchandise, because it is a relatively small amount of money.
Sometimes the buyer is expected to pay for the freight, and it is reported as an increase in the accounts payable.
Also, if the seller experienced a return because of the wrong item shipped, or for a damaged or low-quality product, then the buyer may be granted a refund for cash or for credit back to their account.
The returned purchased is deleted from the merchandise inventory account under the perpetual system.
Sometimes sellers will pay the delivery or the freight costs hoping that it will increase their sales.
These expenses are gathered in the delivery expense.
This is viewed as a selling expense on the income statement.
When a customer is dissatisfied with a product, they will usually return it and these costs are gathered in the sales returns and allowances account which gives the management a more flexible estimate of what products to keep and which ones to discard of.
