Final answer:
Net of the discount refers to the price after discounts, while returned merchandise is goods brought back by customers and affects the net realizable value. These factors reduce total revenue expected from receivables, thus lowering the net realizable value in accounting records.
Step-by-step explanation:
The concepts of net of the discount and returned merchandise are key in determining the net realizable value in accounting. The net of the discount refers to the sale price of an item after all discounts have been applied, while returned merchandise represents goods that have been sold but then returned by the customer. These returns must be subtracted from gross revenue to accurately reflect the net sales that will contribute to net realizable value.
When calculating the net realizable value of a company's receivables, we must consider the net of discounts that were given to customers as these affect the total amount of revenue that can be realized. Additionally, any returned merchandise will decrease the receivables since these are goods that the company cannot earn revenue from. Thus, both the discounts provided and goods returned reduce the overall net realizable value of receivables.
.