1. Recording Transactions Using a General Journal
LESSON 10-3
4/27/2017
LESSON 10-3
Recording Transactions Using a General Journal
Sales Returns & Allowance

2. Why do we need Sales Returns & Allowance?
Customer received the wrong item.
The merchandise was damaged.
Shortage in shipment to the customer.
When customers return merchandise, it decreases the amount of sales that has occurred.

3. Sales Returns & Allowance Account
Sales Returns & Allowance is a CONTRA Account
It has an opposite balance side to its “partner” account.
Sales
Sales Returns & Allowance
CREDIT
Normal balance side
DEBIT
Normal balance side

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

6. T-Account Results 6 page 286 Acct Recv – Village Crafts
Sales Tax Payable
Sales
original dr
original cr
original cr
Allow cr
Allow dr
Result of Sales & Returns:
Sales + Tax $62.01
Sales Returns + Tax
Value of Sales & Tax owed
Sales Returns and Allowances
Allow dr
LESSON 10-3

7. Review Computing Sales Tax
Sales tax is a Percentage calculated on the sales amount.
The calculated sales tax is then added to the sale amount.
Purchased item for $100 with sales of 4%.
$ $ Total Item Amount (Sales)
X 4% Sales Tax Amount (Sales Tax Payable)
$ $ Total Sales Amount (Accts Receivable)