1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 10-3 Recording Transactions Using a General Journal

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 10-3 CREDIT MEMORANDUM FOR SALES RETURNS AND ALLOWANCES page 285

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Sales returns and allowances When merchandise is returned, the customer’s account is reduced: sales returns. Credit can also be given for damaged goods etc and the customer does not even return it. It still reduces accounts receivable: sales allowance\The source document: credit memorandum Sales returns and allowances reduce amount of sales. Sales returns and allowances is a contra account Normal balance for sales and returns: debit. Opposite to sales 3 LESSON 10-3

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Sales returns and allowances How does the contra account assist management? Remember: when something is returned we need to debit sales returns and allowances AND Sales Tax payable. Why? When we post, accounts receivable and customer gets posted. Therefore diagonal line in Post ref column. See page 286 4 LESSON 10-3

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 10-3 JOURNALIZING SALES RETURNS AND ALLOWANCES 1 2 3 4 6 page 286 March 11. Granted credit to Village Crafts for merchandise returned, $58.50, plus sales tax, $3.51, from S160; total, $62.01. Credit Memorandum No. 41. 7 8 9 5 1.Write the date.6.Write the sales tax amount. 2.Write Sales Returns and Allowances. 7.Write the accounts to be credited. 3.Write CM and the credit memorandum number. 8.Draw a diagonal line in the Post. Ref. column. 4.Write the amount of the sales return. 9.Write the total accounts receivable amount. 5.Write Sales Tax Payable.

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 10-3 TERMS REVIEW sales return sales allowance credit memorandum page 287

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Do Now Text book page 287 Workbooks page 229 Do 10-3 Do Audit Read and Summarize Explore Accounting – page 288 7 LESSON 10-3