0:00:00.240,0:00:01.159
Okay.

0:00:01.160,0:00:03.919
You don't want to overstate[br]your cost of inventory

0:00:03.920,0:00:04.999
that you have sold

0:00:05.000,0:00:07.919
because now this $2,000 of worth--

0:00:07.920,0:00:13.159
So, $2,000 is your markup[br]of the cost of $1250.

0:00:13.160,0:00:16.919
$1250 is your actual cost[br]that you spend buying that inventory,

0:00:16.920,0:00:19.079
which you sold for $2,000.

0:00:19.080,0:00:24.319
It was part of the journal entry[br]that happened on the 20th

0:00:24.320,0:00:27.439
when you make a sale on ticket number 53

0:00:27.440,0:00:29.599
for total of $3,000 worth.

0:00:29.600,0:00:32.879
So, what happened in transaction I[br]on the 24th

0:00:32.880,0:00:37.359
is that Penny, your customer,[br]returned $2,000

0:00:37.360,0:00:42.199
of merchandise that cost you $1,250.

0:00:42.200,0:00:44.319
So, you want to credit Penny's account,

0:00:44.320,0:00:47.919
so you go to your subsidiary ledger.

0:00:47.920,0:00:51.359
You look for Penny.

0:00:51.360,0:00:56.199
And now, this is on page number three.[br][computer chimes]

0:00:56.200,0:01:00.779
of the general ledger.

0:01:00.780,0:01:04.459
And this is transaction I, okay?

0:01:04.460,0:01:07.139
And what you want to do is,[br]you want to show--

0:01:07.140,0:01:12.939
or in the quick explanation[br]that you can say is this um, um, issue--

0:01:12.940,0:01:15.699
Oops.

0:01:15.700,0:01:17.659
Credit memo #1.

0:01:17.660,0:01:21.859
So, usually when you issue credit memo[br]to a customer,

0:01:21.860,0:01:24.779
it usually means that[br]you've given credit back

0:01:24.780,0:01:26.899
and they have returned the goods to you,

0:01:26.900,0:01:29.619
or you go ahead[br]and just give them credit without,

0:01:29.620,0:01:32.539
um, having the goods return to you.

0:01:32.540,0:01:36.099
Okay, in this case, it was $2,000

0:01:36.100,0:01:38.019
that you credit the customer.

0:01:38.020,0:01:43.219
So, this customer no longer owe you $3,800

0:01:43.220,0:01:47.419
because they have received

0:01:47.420,0:01:52.499
a $2,000 credit[br]of goods that they have returned to you.

0:01:52.500,0:01:53.699
Okay?

0:01:53.700,0:01:56.979
So, that's your I.

0:01:56.980,0:02:01.169
And now, as we go down,

0:02:01.170,0:02:04.689
there's also something on the 26th for J.

0:02:04.690,0:02:06.329
We receive cash from Penny

0:02:06.330,0:02:10.329
in payment of March 20th ticket number 53.

0:02:10.330,0:02:12.369
And here's a little hint:

0:02:12.370,0:02:14.649
don't forget about the credit memo[br]and discount.

0:02:14.650,0:02:19.329
Well, originally the transaction happened[br]on the 20th.

0:02:19.330,0:02:22.129
The terms of sale is 4/10.

0:02:22.130,0:02:25.369
So, if Penny paid within ten days,

0:02:25.370,0:02:29.289
she gets 4% discount, right?

0:02:29.290,0:02:31.889
But Penny, on the 24th,

0:02:31.890,0:02:34.689
also returned $2,000 worth of goods.

0:02:34.690,0:02:39.009
So, in this journal entry you definitely going to get some cash back.

0:02:39.010,0:02:41.569
You're also going to debit sales discount,

0:02:41.570,0:02:43.649
which, just like sales return and allowances,

0:02:43.650,0:02:45.769
the normal side's on the debit side.

0:02:45.770,0:02:49.729
If we do sales revenue,[br]it's a contra sales revenue account.

0:02:49.730,0:02:54.409
You are also going to credit[br]accounts receivable for Penny.

0:02:54.410,0:02:56.249
Now, first of all,

0:02:56.250,0:03:01.149
if you look at your subsidiary ledger really quickly,

0:03:01.150,0:03:04.309
the ticket number 53 was $3,000.

0:03:04.310,0:03:06.069
The credit was $2000.

0:03:06.070,0:03:09.829
So, for this transaction alone on ticket 53,

0:03:09.830,0:03:14.429
it is only $1,000 worth that Penny owe.

0:03:14.430,0:03:17.269
Be really careful and read through the description

0:03:17.270,0:03:18.749
or the instruction.

0:03:18.750,0:03:21.589
In the instruct-- instruction for J,

0:03:21.590,0:03:25.389
you receive cash from Penny[br]in payment of March 20th.

0:03:25.390,0:03:27.709
sales ticket number 53.

0:03:27.710,0:03:29.629
There was nothing that stated

0:03:29.630,0:03:32.629
that Penny is including payment[br]of this $800,

0:03:32.630,0:03:35.709
the beginning balance that you carry over.

0:03:35.710,0:03:39.629
So, right now, in terms of[br]only looking at ticket 53,

0:03:39.630,0:03:45.229
there was--[br]it was originally for sales of $3,000.

0:03:45.230,0:03:48.629
$2000 has been returned to you.

0:03:48.630,0:03:51.709
So, what you need to make sure you do is that

0:03:51.710,0:03:55.589
there's only $1,000 owed

0:03:55.590,0:03:59.339
by customer Penny on ticket number 53.

0:03:59.340,0:04:01.939
Okay, so pay attention to what the instructions tell you.

0:04:01.940,0:04:04.059
If the instructions tell you,

0:04:04.060,0:04:08.419
"Received cash from Penny[br]for sales ticket 53

0:04:08.420,0:04:13.019
"plus um...um,[br]balance owed from previous month,"

0:04:13.020,0:04:17.259
then you would use[br]this particular balance of $1800.

0:04:17.260,0:04:21.339
But in this case,[br]you're only doing $1,000.

0:04:21.340,0:04:26.019
So, the accounts receivable is $1,000

0:04:26.020,0:04:27.419
that you want to credit.

0:04:27.420,0:04:29.219
And sales discount

0:04:29.220,0:04:33.379
is going to be calculated by $3000--

0:04:33.380,0:04:37.899
that's the original transaction[br]that happened on the 20th--

0:04:37.900,0:04:41.259
minus $2,000

0:04:41.260,0:04:43.499
that Penny returned,

0:04:43.500,0:04:47.299
times 4%.

0:04:47.300,0:04:47.939
Okay?

0:04:47.940,0:04:53.739
So, the amount would be $1,000 times 40--[br]40 [chuckles]

0:04:53.740,0:04:55.779
4%: that's $40.

0:04:55.780,0:04:59.879
And so, the cash that you receive[br]will be $1000

0:04:59.880,0:05:06.439
minus the sales discount of $40.

0:05:06.440,0:05:10.039
Okay?[br]So, that's how you would debit cash,

0:05:10.040,0:05:15.279
debit sales discount, and credit that $1,000.

0:05:15.280,0:05:21.999
So, you credit $1,000,[br]and this was transaction J,

0:05:22.000,0:05:27.319
and you're paying off, umm...

0:05:27.320,0:05:35.199
You're paying with discount[br]for ticket number 53.

0:05:35.200,0:05:35.639
Okay?

0:05:35.640,0:05:41.519
So now, the balance that Penny owes

0:05:41.520,0:05:46.079
is going to be $800,

0:05:46.080,0:05:49.359
the balance that was carried over[br]from the previous month.

0:05:49.360,0:05:54.199
For whatever reason, Penny has not yet[br]paid that previous balance.

0:05:54.200,0:05:58.680
Penny just make payment on her[br]current transaction this month, okay?