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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

JOURNALIZING SALES RETURNS AND ALLOWANCES Enter the following transactions starting on page 60 of a general journal and post them to the appropriate general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter. Beginning balance in Accounts Receivable is $3,900. Beginning balances in selected customer accounts are Adams, $850; Greene, $428; and Phillips, $1,018.

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To determine

Journalize the transactions related to sales return and allowances transactions and post those entries to the accounts in general ledger and the accounts receivable ledger.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the transactions related to sales return and allowances.

Transaction on June 1:

Page: 60
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
June1Sales Returns and Allowances 401.143 
   Accounts Receivable, MP122/✓ 43
  (Record merchandise returned)   

Table (1)

Description:

  • Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
  • Accounts Receivable, MP is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Transaction on June 11:

Page: 60
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
June11Sales Returns and Allowances 401.149 
   Accounts Receivable, JA122/✓ 59
  (Record merchandise returned)   

Table (2)

Description:

  • Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
  • Accounts Receivable, JA is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Transaction on June 15:

Page: 60
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
June15Sales Returns and Allowances 401.121 
   Accounts Receivable, LG122/✓ 21
  (Record merchandise returned)   

Table (3)

Description:

  • Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
  • Accounts Receivable, LG is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Post the journalized transactions into the accounts of the general ledger.

ACCOUNT    Accounts Receivable                                         ACCOUNT NO...

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