A Merchandiser Frequently Has a Need to Use Contra Accounts

question 103

Essay

A merchandiser frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.

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Definitions:

Breach of Contract

Violation of any terms or conditions in a contract without a lawful excuse, which may result in legal action.

Adequacy of Consideration

A legal principle assessing whether what is exchanged in a contract (goods, services, or money) is fair and of sufficient value.

Mistake as to Existence

A legal misunderstanding or error regarding the actual existence of a subject matter or condition of a contract.

Fraudulent Misrepresentation

A false statement made knowingly without belief in its truth or recklessly and without concern for its truth, which induces another party to enter into a contract.