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Do Now. What would be the journal entry for a seller who has merchandise returned to them? What accounts would this affect? Would these accounts be debited or credited? Why?. 10-3: Recording Transactions Using a General Journal.

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Do now

Do Now

  • What would be the journal entry for a seller who has merchandise returned to them?

  • What accounts would this affect?

  • Would these accounts be debited or credited? Why?


10 3 recording transactions using a general journal

10-3: Recording Transactions Using a General Journal

  • Customer may return merchandise for credit on account or cash refund

    • Sales return: Credit allowed a customer for sales price of returned merchandise, resulting in decrease in vendor’s accounts receivable

  • Credit may be granted to customer without requiring return of merchandise and also may be given because of a shortage in a shipment

    • Sales allowance: credit allowed a customer for part of sales price of merchandise that is not returned, resulting in a decrease in vendor’s accounts receivable


10 3 recording transactions using a general journal1

10-3: Recording Transactions Using a General Journal

  • Vendor usually informs customer in writing when sales return or sales allowance is granted

  • Credit memorandum: form prepared by vendor showing amount deducted for returns and allowances

    • original given to customer and copy used as source document

  • Sales returns and sales allowances decrease amount of sales

    • Account Sales Returns and Allowances is a contra account to revenue account Sales

    • Thus, normal debit account balance of Sales Returns and Allowances is a debit, the opposite of the normal balance of Sales, a credit


10 3 general journal sales returns allowances p 286

10-3 General Journal: Sales Returns & Allowances p. 286

  • When a customer returns something or receives something damaged

  • Source document: Credit Memorandum

  • The Sales transaction has already been recorded on the Sales Journal

  • *Remember: A General Journal requires a debit and a credit entry

March 11. Granted credit to Village Crafts for merchandise returned, $58.50,

plus sales tax, $3.51, from S150; total, $62.01, Credit Memorandum # 41


Practice

PRACTICE:

  • 10-3 WT - Textbook page 287, WP page 229

  • 10-3 OYO – Textbook page 287, WP page 230


Continued problems

Continued Problems

  • Application Problems 10-1 thru 10-3

    • Textbook Pages 289-290

    • Working Papers Pages 231-233

  • Working Papers Study Guide:

    • Pages 221-223


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