Accounting Ch 11 Notes
May or may not effect ___
vendor inventory
if incorrect number of items billed...
vendor must adjust their inventory to reflect correct units
Its a debit memo because...
you will debit A/P to reduce the amount owed to the vendor
Which accounts are effected when correcting Errors in Subsidiary Ledger Accounts?
Subsidiary ledger accounts ONLY effected NOT general ledger (controlling) accounts
How is it posted?
The entry must be posted to BOTH accounts for the value in the Dr or Cr column
When, if ever, is it permissible to have two account titles written on the same account title line?
When using the GL and a transaction affects a GENERAL LEDGER account, the related SUBSIDIARY account must also be written on the account title line
An ______ is reduction allowed for _______, such as damage, quality, or shortage in a shipment
allowance merchandise that is not returned
a form prepared ______ the customer showing the price deduction taken by the customer for a return or allowance is called a _____
by (you) debit memorandum
credit memo because you will...
credit A/R to reduce the amount owed by your customer
A form prepared by (you) the vendor showing the amount deducted for returns and allowances is called a ____
credit memorandum
Make sure to also...
credit sales tax payable or the amount of sales tax recorded for the value of the return!!!!
Both result in a _____ in the accounts receivable of the merchandising business
decrease
If correct number of items recorded but kept by customer...
no effect on vendor inventory
credit allowed for ____ of the purchase price of merchandise that is ______, resulting in a decrease in the customer's account payable to the vendor, is a _______
part not returned Purchases allowance
The Purchases Returns and Allowance account is a contra account to ___ and therefore has a ____ balance
purchases credit
A debit memorandum is the source document for journalizing ____ and ____
purchases returns allowances
debit memorandum It is a contra account to....
purchases so it has a normal credit balance
credit allowed for the purchase price of _____, resulting in a decrease in the customer's account payable to the vendor, is called a ____
returned merchandise purchases return
Credit allowed to a customer for the sales price of _____ is called a ____
returned merchandise sales return
The Sales Returns and Allowances Account is a contra account to ___ and therefore has a normal ___ balance
sales debit
A _____ is used to separate the account title and account #s in the post reference column
/
A _____ is used to separate the account titles
/
What is the difference between a return and an allowance?
A RETURN is the price of RETURNED MERCHANDISE (you) the vendor MUST adjust their inventory to reflect items (value)
debit memorandum you will DEBIT _____ to reduce the amount you owe
A/P
A credit memorandum is the source document for journaling sales returns and allowances You will credit ____ to reduce the amount the customer owes Sales returns and allowances is a contra account to _____ Which accounts are affected, and how, by a sales returns and allowances transaction?
A/R Sales Debit sales returns and allowances And sales tax payable (if applicable) Credit Accounts Receivable/related subsidiary account (customer)
For example of subsidiary ledger being the only one effected when correcting errors in the subsidiary ledger accounts, if
ABC company owes money instead of XYZ company, correcting the balances in the individual account does not change the total of all amounts owed, just who owes it. Therefore there is no change to the A/R in the G/L
Credit memo reduces.. Debit memo reduces...
AR AP
Only the individual (subsidiary) account is changed when correcting errors in the subsidiary ledger accounts, there is no overall effect to the _________ (_____)
Controlling account (G/L)
A ____ is the source document for journalizing sales returns and allowances
Credit memorandum
debit memorandum which accounts are affected, and how, by a purchases returns and allowances transaction?
Dr Accounts Payable/Subsidiary Account (vendor) Cr purchases returns and allowances
Learned that a sale on account to Ashston and Lindsay LLP was incorrectly charged to the account of Abraham Corporation, $623.00. Memorandum No. 61.
Dr Ashton and Lindsay LLP Cr Abraham Corporation
Found that a sale on account to Keller Associates was incorrectly charged to the account of Karson Properties, $598.00. Memorandum No. 62.
Dr Keller Associates Cr Karson Properties
Granted credit to Lambert Schools for damaged merchandise, $206.00 (no sales tax), from S633. CM29.
Dr Sales returns and allowances Cr accounts receivable/lambert schools
Granted credit to Keller Associates for merchandise returned, $245.00, plus sales tax, $14.70, from S645; total, $259.70. CM28.
Dr sales returns and allowances sales tax payable Cr accounts receivable/keller associates
credit allowed to a customer for part of the sales price of merchandise that is _____ is called a _____
NOT returned sales allowance
Why are purchases returns and allowances not directly credited to the purchases account OR sales returns and allowances not directly debited to the Sales account?
To provide better ORGANIZED INFORMATION to management, enabling management to quickly learn if the percent of returns and allowances is greater than expected or industry norm, evaluate the efficiency of its purchasing activities, evaluate the efficiency of its sales activities, etc.