Question

How do you do this journal entry for accounting?

Answer 1

Answer:

Journal Entries:

1. Debit Sales Returns & Allowance $1,040

Credit Accounts Receivable $1,040

To record the estimated cost of returns.

2. Debit Inventory $333

Credit Cost of goods sold $333

To record the estimated cost of the goods returned.

Explanation:

a) Data and Analysis:

1. Sales returns and Allowances $1,040 Accounts receivable $1,040

2. Inventory $333 Cost of goods sold $333

The first journal entry records the estimated returns to be made by the customers by debiting the Sales returns account (a contra account to the sales revenue account).  The corresponding credit entry in the Accounts receivable shows that a part of the accounts has been cancelled as a result of the estimated sales returns.

The second journal entry records the estimated cost of the goods to be returned by debiting the Inventory account and crediting the Cost of goods sold account.  This cancels earlier records.