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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Sales-related transactions

The debits and credits for three related transactions are presented in the following T accounts. Describe each transaction.

Chapter 6, Problem 6.11EX, Sales-related transactions The debits and credits for three related transactions are presented in

To determine

Sales is an activity of selling the merchandise inventory of a business.

To Describe: The sale of merchandise inventory on account.

Explanation
  1. (1) Describe the sale of merchandise inventory on account.
Date Accounts and Explanation Debit ($) Credit ($)
  Accounts Receivable 41,160  
  To Sales Revenue   41,160
  (To record the sale of inventory on account)    

Table (1)

  • Accounts Receivable is an asset and it is increased by $41,160. Therefore, debit accounts receivable with $41,160.
  • Sales revenue is revenue and it increases the value of equity by $41,160. Therefore, credit sales revenue with $41,160.
  1. (2) Describe the entry for cost of goods sold.
Date Accounts and Explanation Debit ($) Credit ($)
  Cost of Merchandise Sold 25,200  
  Merchandise Inventory   25,200
  (To record the cost of goods sold)    

Table (2)

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $25,200. Therefore, debit cost of merchandise sold account with $25,200.
  • Merchandise Inventory is an asset and it is decreased by $25,200. Therefore, credit inventory account with $25,200.
  1. (3) Describe the journal entry for sales return.
Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

  Customer Refunds Payable   1,960  
          Accounts Receivable     1,960
  (To record sales returns)      

Table (3)

  • Customer refunds payable is a liability account and decreased by $1,960...

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