Alright so now let's dive a little more into revenue and see what kind of things could decrease our revenue. Alright let's start with the first one here, a sales discount. Okay so there's a special system we use to denote discounts and I want to be real quick about this discounts where this is a special kind of discount, this isn't a discount on, you know you walk into Walmart and they say hey 50% off this, this isn't that type of discount. This is a discount for when you extend credit to a customer. So let's say you allow the customer 30 days to pay but they pay you sooner. Okay they're paying you quicker. Well that's when they get this discount. Okay so this is a discount for quick payment. Okay and we're gonna see the same thing on the purchases side. But now let's see how this deals with on the sales side. Okay so on the sales side in all situations we're gonna deal with this notation. Okay we're gonna see something like this where it says to 10 and 30 which reads as 2 10 net 30. Okay so this is like a special notation they use to basically try and be extra confusing here but you just want to know what each of these numbers mean. Okay so what we have here, we've got this two in the 2 10 net 30. The two is the percentage amount of the discount. Okay so remember we're giving the customer a discount for paying us quickly. Okay so if they pay us quick enough they can take 2% off of the price and and pay us a little less. Okay so that's the benefit to the customer for paying us quicker. Okay so this 10 well that's the amount of time we're giving them to get the discount. Okay So that's a number of days. So this basically says that if they pay us in the next 10 days they can take a 2% discount off of the payment. Cool. And then the end well that just stands for net there's nothing really um about that. It basically just tells us that the net 30 this 30 so we'll let me pull it from the other one over here. The 30. That's the total days that you're allowed to pay. Okay? And if if you take till the 30th day let's say you're paying on the 30th day. Well you don't get the 2% discount right? Even if you're paying on the 11th day on the 12th day you're not gonna get the 2% discount. This 30 just tells you the total amount of days. Okay So generally that doesn't really matter the 30. Honestly when you when you're taking this class that that last number is not gonna make a big difference in our calculations. Okay the numbers you really want to focus on is the two which is the percentage discount and the 10. Okay so those numbers could change right? We could see like 1 10 net 30 or 3 15 net 45. Right? All these numbers can change but the meaning of the number stays the same. The first one is the percentage discount. Then the days to receive the discount and then finally the total days allowed. Alright, so let's go ahead and do this first example and let's go ahead and see this in action. Okay. Abc company sold 100 units of product X for $2000 on january 14th. Okay. Abc offered terms of 3 10 net 45. Okay, so that's the important thing right there, that's our sales discount. Abc company received payment on january 19th. Record the sale and receipt of cash in abc company's books. Alright, so there's gonna be two entries here, There's gonna be the first entry when we make the sale and then a second entry when we receive the payment. Okay So the first thing we want to consider is whether or not they're going to get the discount. Okay so we have the sale was on january 14th and the receipt of payment was on the 19th. So january 14th. We had the 15th 16th, 17th, 18th 19th. They paid you five days later so this is perfectly fine. Right? They they they made it under the 10 day threshold and they do get the discount. Okay, so one more thing here when we when we do sales discounts, there's two ways to discuss them. We can have the gross method or the net method. Alright. Generally pretty much every teacher and every textbook for the first accounting class is only in a focus on the gross method. Okay. So you're pretty much likely only to need to know the gross method. I'm also gonna do the net method in a separate video that way, just in case your teacher, you know, is super vigilant and wants you to learn it, you'll have access to that as well. Okay, so let's start here with the gross method and let's do the first entry. Okay? So the sales entry is very simple. We're just gonna make the entry uh on the sales day. And when we say gross, that means the full amount. Okay, the gross amount is the full amount. And it says that we sold 100 units for $2000 right? And we haven't received any money, right? We gave them credit to pay us over the next 45 days, we gave them the chance to pay us right? Net 45. So our entry is gonna be, we're gonna debit accounts receivable, right? I'm gonna put a ar for accounts receivable, And we're going to debit that 2000, right? Because we're owed $2,000. So now we have this asset for $2,000. Uh we're debating right there and we're going to credit our revenue, right? We earned the revenue, we sold the product to the customer, so we earn our revenue at this point and we earned 2000 in revenue. Okay So now we're going to receive the money a few days later. But remember when we receive the money, we're not going to receive the full 2000 right? They've earned the discount, they're allowed to take 3% off the price. So let's see how much we're actually gonna get, right if it's 2000 was the total amount. Let's see what the amount of the discount was. 3% 2000 times point oh three is $60 is the amount of the discount? Okay So we're not gonna receive $2000 we're gonna receive 2000 minus $60. So 2000 minus 60 the cash. So the cash is going to be 2000 minus 60 1940. Okay So since they're paying us so soon they don't have to pay us the full 2000, they can get away with paying us 1940. So the receipt, yes, we're gonna receive cash, right? And this cash is 1940. That's the amount of cash that we received from the customer. So we're gonna debit cash for that amount and then we're gonna have the discount, right? There was a sales discount. And this sales discount is gonna be a contra account to the revenue. So remember we talked about contra accounts, they have an opposite balance, right? So a revenue account has a credit balance. So a contra revenue account, an account that decreases our revenue is going to have a debit balance. Okay. So we're gonna have this account and we're gonna call it sales discounts. Okay. And that's where the $60 is gonna go, right? Because we're supposed to get 2000, we only get 1940. So this $60 we want to keep keep track of how many sales discounts we have we're giving to our customers so we put them all into this account, it helps us manage. You know, how much were the sales discounts instead of just directly debating revenue? Right? If we were to just debit revenue $60, we wouldn't have as much information here. We're keeping all the discounts separate in this other account. Sales discounts. So we have our debit to cash for 1940, our debit to sales discounts which is right. That's decreasing our revenue from the 2000 we earned above. It's decreasing it now to a net of the 1940 that we received. So the last thing is the credit part of this transaction and the credit part, well we were we were originally owed this much money, right? We had an accounts receivable for $2,000 but we don't get we're not owed that money anymore. Right? The customer made good on their payment and they paid us already. So we're gonna get rid of the accounts receivable with a credit, whoops, The credit of 2000 is going to get rid of that account receivable. And how was it paid off? Well, we got 1940 in cash and the rest was a sales discount. Cool. So that's what the entries look like from the gross method. Let's pause here and do the net method. Remember not everybody's gonna need to know the net method, so just double check with your syllabus or with your teacher and see if you're gonna need to focus on the net method as well. Alright, let's do that now.