1. Accounting 3 Chapter 19 Section 3

2. Credit Memorandum for Sales Returns and Allowances As in 18-4, Debit Memorandums are used when a customer wants to return or get credit for merchandise from the selling company. As in 18-4, Debit Memorandums are used when a customer wants to return or get credit for merchandise from the selling company. When a selling company grants the request of the Debit Memorandum, the document issued to the customer is called a Credit Memorandum. When a selling company grants the request of the Debit Memorandum, the document issued to the customer is called a Credit Memorandum. When the return of the merchandise is allowed, the selling company considers this a Sales Return. When the return of the merchandise is allowed, the selling company considers this a Sales Return. When the selling company allows a credit to the customer’s accounts receivable account but does not actually receive the merchandise back, it is called a Sales Allowance. When the selling company allows a credit to the customer’s accounts receivable account but does not actually receive the merchandise back, it is called a Sales Allowance.

3. Journalizing Sales Returns and Allowances The General Journal is used for this type of transaction since it is not used as frequently as other transactions. The General Journal is used for this type of transaction since it is not used as frequently as other transactions. Sales Returns and Allowances is on the first line of the entry as a debit. Sales Returns and Allowances is on the first line of the entry as a debit. Sales Tax Payable is on the second line of the entry also as a debit (sales tax owed must be decreased). *If sales tax was not charged, this will not be included in the entry. Sales Tax Payable is on the second line of the entry also as a debit (sales tax owed must be decreased). *If sales tax was not charged, this will not be included in the entry. Accounts Receivable/Customer Account is indented on the third line as a credit. Accounts Receivable/Customer Account is indented on the third line as a credit.

4. March 11. Granted credit to Parson Company for merchandise returned, $58.50, plus sales tax, $4.68; total, $63.18. Credit Memorandum No. 41. General Journal Page ___ DateAccount Title Post Ref. Doc. No. DebitCredit 3 Mar11Sales Returns and AllowancesCM41 5 8 50 Sales Tax Payable 4 68 Accounts Receivable/Parsons Company 6 3 18

5. Journalizing Correcting Entries Affecting Customer Accounts This transaction basically reverses errors. This transaction basically reverses errors. To do this, use the General Journal and debit the account that was supposed to be affected and credit the account that was not supposed to be affected. To do this, use the General Journal and debit the account that was supposed to be affected and credit the account that was not supposed to be affected. Example transaction and visual steps on next slide. Example transaction and visual steps on next slide.

6. March 12. Discovered that a sale on account to York East High School on February 26, S133, was incorrectly charged to the account of York North High School, $412.00. Memorandum No. 40. General Journal Page ___ DateAccount Title Post Ref. Doc. No. DebitCredit 3 Mar12York East High SchoolM40 4 1 2 00 York North High School *Do not forget to indent the credit portion of the entry.

7. Posting to a General and Accounts Receivable Ledger Each of the entries discussed in this section should be posted individually to their respective accounts/ledgers. Each of the entries discussed in this section should be posted individually to their respective accounts/ledgers. This is done the same way as in chapter 18. This is done the same way as in chapter 18. As usual, do not forget to go back to your journal and list the account numbers for posting references; especially if there are two accounts in one line. As usual, do not forget to go back to your journal and list the account numbers for posting references; especially if there are two accounts in one line.

8. Schedule of Accounts Receivable and Accounts Payable These are used to prove that what is in the accounts receivable/payable account in the general ledger matches the totals of all the accounts in the accounts receivable/payable ledgers. These are used to prove that what is in the accounts receivable/payable account in the general ledger matches the totals of all the accounts in the accounts receivable/payable ledgers. To do this, use the form provided, fill out the title as usual, then list all of the accounts still open in either the accounts receivable/payable ledger (whichever applies in that situation). To do this, use the form provided, fill out the title as usual, then list all of the accounts still open in either the accounts receivable/payable ledger (whichever applies in that situation). Total up all of the accounts and make sure it matches the accounts receivable/payable account total in the general ledger. If it does not match, something is incorrect. Total up all of the accounts and make sure it matches the accounts receivable/payable account total in the general ledger. If it does not match, something is incorrect.

9. One more note on Posting If you are working with all five journals at once and need to post, there is a specific order it must be done. If you are working with all five journals at once and need to post, there is a specific order it must be done. 1. Sales Journal 2. Purchases Journal 3. General Journal 4. Cash Receipts Journal 5. Cash Payment Journal This is done because it usually puts the debits and credits in the accounts in the order the transactions occurred. This is done because it usually puts the debits and credits in the accounts in the order the transactions occurred.

10. Work Together p. 503 General Journal Page ___ DateAccount Title Post Ref. Doc. No. DebitCredit 6 Jun3Sales Returns and AllowancesCM41 4115 4 5 7 00 Sales Tax Payable 2140 3 6 56 Accts Rec/Wilbanks & Assoc. 4 9 3 56 1125 190 6Sales Returns and AllowancesCM42 4115 6 7 00 Accts Rec/Westfall High School 1125 180 6 7 00 9Howsley Dance StudioM17 150 4 1 4 99 D Howell, MD 140 4 1 4 99 Look at postings by clicking on posting reference numbers which are hyperlinked. Schedule of Accounts Receivable Assignmen t

11. CustomerCust No. DateItem Post Ref DebitCredit Debit Balance CustomerCust No. DateItem Post Ref DebitCredit Debit Balance Accounts Receivable Ledger D. Howell, MD 140 Jun 9 G6 4 1 4 99 4 1 4 99 Jun 1 Balance 4 1 4 99 Howsley Dance Studio 150 9 G6 4 1 4 99

12. CustomerCust No. DateItem Post Ref DebitCredit Debit Balance CustomerCust No. DateItem Post Ref DebitCredit Debit Balance Accounts Receivable Ledger Westfall High School 180 Jun 1 Balance 3 9 2 50 6 G6 6 7 00 3 2 5 50 Wilbanks & Associates190 Jun 1 Balance 2 7 9 2 60 3 G6 4 9 3 56 2 2 9 9 04

13. Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT General Ledger Accounts Receivable 1125 Jun 1 Balance 3 6 0 0 09 3 G6 4 9 3 56 3 1 0 6 53 6 G6 6 7 00 3 0 3 9 53 Sales Tax Payable2140 Jun 1 Balance 4 7 2 60 3 G6 3 6 56 4 3 6 04

14. Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT General Ledger Sales Returns and Allowances4115 Jun 1 Balance 3 9 7 6 80 3 G6 4 5 7 00 4 4 3 3 80 6 G6 6 7 00 4 5 0 0 80

15. Cline Interiors Schedule of Accounts Receivable June 30, 2007 D Howell, MD 4 1 4 99 Westfall High School 3 2 5 50 Wilbanks and Associates 2 2 9 9 04 Total Accounts Receivable 3 0 3 9 53 * If the total here matches the total Accounts Receivable in the General Ledger, then everything is correct.

16. Assignment Do Application 19-3 by hand. Do Application 19-3 by hand. Turn it into Mrs. Middleton. Turn it into Mrs. Middleton. Read Section 19-4; Do Application 19-4 by hand. (Ask questions if needed) Read Section 19-4; Do Application 19-4 by hand. (Ask questions if needed) Do Mastery Problem on Automated Accounting 8 Software. Print all pages in instructions. Do Mastery Problem on Automated Accounting 8 Software. Print all pages in instructions. Turn it into Mrs. Middleton. Turn it into Mrs. Middleton. Move on to Chapter 20. Move on to Chapter 20.