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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
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BuyFindarrow_forward

College Accounting, Chapters 1-27

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

JOURNALIZING PURCHASES RETURNS AND ALLOWANCES AND POSTING TO GENERAL LEDGER AND ACCOUNTS PAYABLE LEDGER Using page 3 of a general journal and the following general ledger and accounts payable ledger accounts, journalize and post the following transactions:

July 7    Returned merchandise to Starcraft Industries, $700.

15    Returned merchandise to XYZ, Inc., $450.

27    Returned merchandise to Datamagic, $900.

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To determine

Journalize the transactions related to purchases returns and allowances transactions and post those entries to the accounts in general ledger and the accounts payable 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 purchases returns and allowances.

Transaction on July 7:

Page: 3
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
July7Accounts Payable, S Industries202/✓700 
   Purchases Returns and Allowances501.1 700
  (Record merchandise returned)   

Table (1)

Description:

  • Accounts Payable, S Industries is a liability account. Since inventory is returned, amount to be paid has decreased, liability account is decreased, and a decrease in liability is debited.
  • Purchases Returns and Allowances is a contra-cost account, and contra-cost accounts increase the equity value, and an increase in equity is credited.

Transaction on July 15:

Page: 3
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
July15Accounts Payable, Incorporation X202/✓450 
   Purchases Returns and Allowances501.1 450
  (Record merchandise returned)   

Table (2)

Description:

  • Accounts Payable, Incorporation X is a liability account. Since inventory is returned, amount to be paid has decreased, liability account is decreased, and a decrease in liability is debited.
  • Purchases Returns and Allowances is a contra-cost account, and contra-cost accounts increase the equity value, and an increase in equity is credited.

Transaction on July 27:

Page: 3
DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
July27Accounts Payable, D202/✓900 
   Purchases Returns and Allowances501.1 900
  (Record merchandise returned)   

Table (3)

Description:

  • Accounts Payable, D is a liability account. Since inventory is returned, amount to be paid has decreased, liability account is decreased, and a decrease in liability is debited.
  • Purchases Returns and Allowances is a contra-cost account, and contra-cost accounts increase the equity value, and an increase in equity is credited.

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

ACCOUNT    Accounts Payable                                              ACCOUNT NO...

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