WEBVTT

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Okay.

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You don't want to overstate
your cost of inventory

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that you have sold

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because now this $2,000 of worth--

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So, $2,000 is your markup
of the cost of $1250.

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$1250 is your actual cost
that you spend buying that inventory,

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which you sold for $2,000.

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It was part of the journal entry
that happened on the 20th

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when you make a sale on ticket number 53

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for total of $3,000 worth.

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So, what happened in transaction I
on the 24th

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is that Penny, your customer,
returned $2,000

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of merchandise that cost you $1,250.

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So, you want to credit Penny's account,

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so you go to your subsidiary ledger.

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You look for Penny.

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And now, this is on page number three.
[computer chimes]

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of the general ledger.

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And this is transaction I, okay?

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And what you want to do is,
you want to show--

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or in the quick explanation
that you can say is this um, um, issue--

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Oops.

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Credit memo #1.

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So, usually when you issue credit memo
to a customer,

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it usually means that
you've given credit back

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and they have returned the goods to you,

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or you go ahead
and just give them credit without,

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um, having the goods return to you.

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Okay, in this case, it was $2,000

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that you credit the customer.

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So, this customer no longer owe you $3,800

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because they have received

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a $2,000 credit
of goods that they have returned to you.

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Okay?

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So, that's your I.

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And now, as we go down,

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there's also something on the 26th for J.

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We receive cash from Penny

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in payment of March 20th ticket number 53.

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And here's a little hint:

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don't forget about the credit memo
and discount.

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Well, originally the transaction happened
on the 20th.

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The terms of sale is 4/10.

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So, if Penny paid within ten days,

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she gets 4% discount, right?

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But Penny, on the 24th,

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also returned $2,000 worth of goods.

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So, in this journal entry you definitely going to get some cash back.

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You're also going to debit sales discount,

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which, just like sales return and allowances,

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the normal side's on the debit side.

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If we do sales revenue,
it's a contra sales revenue account.

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You are also going to credit
accounts receivable for Penny.

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Now, first of all,

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if you look at your subsidiary ledger really quickly,

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the ticket number 53 was $3,000.

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The credit was $2000.

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So, for this transaction alone on ticket 53,

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it is only $1,000 worth that Penny owe.

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Be really careful and read through the description

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or the instruction.

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In the instruct-- instruction for J,

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you receive cash from Penny
in payment of March 20th.

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sales ticket number 53.

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There was nothing that stated

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that Penny is including payment
of this $800,

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the beginning balance that you carry over.

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So, right now, in terms of
only looking at ticket 53,

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there was--
it was originally for sales of $3,000.

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$2000 has been returned to you.

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So, what you need to make sure you do is that

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there's only $1,000 owed

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by customer Penny on ticket number 53.

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Okay, so pay attention to what the instructions tell you.

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If the instructions tell you,

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"Received cash from Penny
for sales ticket 53

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"plus um...um,
balance owed from previous month,"

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then you would use
this particular balance of $1800.

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But in this case,
you're only doing $1,000.

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So, the accounts receivable is $1,000

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that you want to credit.

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And sales discount

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is going to be calculated by $3000--

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that's the original transaction
that happened on the 20th--

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minus $2,000

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that Penny returned,

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times 4%.

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Okay?

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So, the amount would be $1,000 times 40--
40 [chuckles]

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4%: that's $40.

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And so, the cash that you receive
will be $1000

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minus the sales discount of $40.

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Okay?
So, that's how you would debit cash,

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debit sales discount, and credit that $1,000.

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So, you credit $1,000,
and this was transaction J,

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and you're paying off, umm...

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You're paying with discount
for ticket number 53.

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Okay?

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So now, the balance that Penny owes

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is going to be $800,

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the balance that was carried over
from the previous month.

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For whatever reason, Penny has not yet
paid that previous balance.

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Penny just make payment on her
current transaction this month, okay?