00:01
In this example, we're going to be talking about the journal entry from the seller's side.
00:05
Raymond purchases $5 ,000 of merchandise on account with credit terms to 10 net 30.
00:12
That means if they pay us within 10 days, they get a 2 % discount, and if not, they owe the rest within 30 days.
00:20
The cost of the merchandise was 3 ,750.
00:23
The initial entry needed to be made here would include a debit to account receivable to show that the company bought on account, and a credit to sales revenue, because we did deliver the merchandise.
00:41
We also have to take the inventory off of our books.
00:45
We would do this as a debit to cost of goods sold for the amount of the cost of the inventory, and a credit to merchandise inventory to show that we no longer have this on our shelves.
00:58
Now, what if they returned merchandise? we would have to reverse a portion of each of these journal entries.
01:06
I'm going to debit sales revenue to decrease it by the amount that i would need to give them for the return.
01:16
And same thing, credit ar, reversing a portion of that first entry...