1. LESSON 10-3 Recording Transactions Using a General Journal
7/6/2018
LESSON 10-3
Recording Transactions Using a General Journal

2. SALES RETURNS AND ALLOWANCES
Most merchandising businesses expect to have some merchandise returned.
Customers may receive the wrong item or damaged goods
Customers may return merchandise for a credit on account or a cash refund
A sales return is credit allowed to a customer for the sales price of returned merchandise – this results in a decrease in the vendor’s accounts receivable
Credit could be granted to a customer without requiring the return of merchandise
Credit may also be given due to a shortage in shipment
A sales allowance is credit allowed to a customer for part of the sales price of merchandise that is not returned – this results in a decrease in the vendor’s accounts receivable
LESSON 10-3

3. SALES RETURNS AND ALLOWANCES
A customer is usually informed in writing when a sales return or a sales allowance is granted.
A credit memorandum is a form prepared by the vendor showing the amount deducted for returns and allowances
The copy of this is used as the source document for recording the sales returns and allowances transaction
Sales returns and allowances decrease the amount of sales.
Sales returns and allowances is a contra account the Sales revenue account
LESSON 10-3

4. CREDIT MEMORANDUM FOR SALES RETURNS AND ALLOWANCES
page 285
LESSON 10-3

5. JOURNALIZING SALES RETURNS AND ALLOWANCES
page 286
March 11. Granted credit to Village Crafts for merchandise returned, $58.50, plus sales tax, $3.51, from S160; total, $ Credit Memorandum No. 41. 2 4 1 3 5 6 9 8 7
1. Write the date.
6. Write the sales tax amount.
2. Write Sales Returns and Allowances.
7. Write the accounts to be credited.
3. Write CM and the credit memorandum number.
8. Draw a diagonal line in the Post. Ref. column.
4. Write the amount of the sales return.
9. Write the total accounts receivable amount.
5. Write Sales Tax Payable.
LESSON 10-3

6. TERMS REVIEW sales return sales allowance credit memorandum page 287
LESSON 10-3

7. Work Together 10-3 – page 287
Using the current year, journalize the following transactions on page 6 of a general journal. Source documents are abbreviated as: credit memorandum, CM; sales invoice, S. Transactions: June 3. Granted credit to Wilbanks and Associates for merchandise returned, $457.00, plus sales tax, $36.56, from S356; total, $ CM41 6. Granted credit to Westfall High School for damaged merchandise, $67.00 (no sales tax), from S345. CM42.
LESSON 10-3

8. Work Together 10.3 6 June 3 Sales returns and Allowances CM41 457.00
36.56
Sales returns and Allowances
493.56
Sales returns and Allowances 6
CM42
Sales returns and Allowances
67.00
LESSON 10-3

9. On Your Own 10.3 – page 287
Using the current year, journalize the following transactions on page 7 of a general journal. Source documents are abbreviated as: credit memorandum, CM; sales invoice, S. Transactions: July 3. Granted credit to Carver High School for damaged merchandise, $46.00 (no sales tax), from S642. CM Granted credit to Karen’s Fine Gifts for merchandise returned, $425.00, plus sales tax, $25.50, from S623; total, $ CM87
LESSON 10-3

10. Audit Your Understanding 10-3
What is the difference between a sales return and a sales allowance?
What is the source document for journalizing sales returns and allowances?
What general ledger accounts are affected, and how, by a sales returns and allowances transaction?
Why are sales returns and allowances not debited to the sales account?
LESSON 10-3