Journalizing Sales and Cash

Receipts Using Special Journals

Chapter 10, Section 3
Sales Returns and Allowances
• Sales Return
▫ Credit allowed a customer for the sales price of
returned merchandise
• Sales Allowance
▫ Credit allowed a customer for part of the sales
price of merchandise that is not returned

• Contra account to Sales Sales Returns and Allowances

Debit
Normal Balance

 
Credit Memorandum
• Form prepared by the vendor showing the amount deducted for
returns and allowances
• Called a credit memorandum because Accounts Receivable is
credited when there is a return or allowance
 Recording Sales Returns and Allowances
• What accounts are affected?
• How are the accounts affected? Debit or credit?
• What is the source document?
• What journal?

Sales Returns and Accounts Receivable/

Allowances Customer Name Sales Tax Payable
Debit Debit Credit
Normal Balance Normal Balance Normal Balance

  
Journalizing Sales Returns and Allowances
March 11. Granted credit to Village Crafts for merchandise returned, $58.50,
plus sales tax, $3.51, from S160; total, $62.01. Credit Memorandum No. 41.

2 4
1 3
5
6 9
7 8
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 8. Draw a diagonal line in the Post.
number. Ref. column.
4. Write the amount of the sales return. 9. Write the total accounts receivable
5. Write Sales Tax Payable. amount.
Problems
• Work Together 10-3 (Textbook pg. 287)

• On Your Own 10-3 (Textbook pg. 287)

• Application 10-3 (Textbook pg. 290)