00:01
In this example, we're going to be talking about selling merchandise, receiving payments, and refunds.
00:06
I sold merchandise on account for $18 ,000 with terms 110 knit 30.
00:14
This will apply to the discount, which we will come back to.
00:19
When i sell merchandise on account, it means i haven't received the money yet.
00:24
I would debit accounts receivable to reflect that i'm still waiting to receive this money.
00:29
And i would credit sales revenue because i need to increase my revenue account to reflect that i have delivered these goods.
00:40
Now i need to deal with getting the inventory off of my books.
00:44
We no longer have this inventory.
00:46
You could call it inventory or merchandise.
00:52
And the debit here would go to cost of goods sold, increasing my expenses, and decreasing the inventory to show it's no longer on my books.
01:05
What happens when we receive payment less the discount? well, let's talk about first what the customer would get as a discount...