1SE - Horngren'S Financial And Managerial Accounting

Question

Journalize the following sales transactions for Paul Sportswear. Explanations are not required.

Aug. 1 Paul sold \(66,000 of women’s sportswear on account, credit terms are 2/10, n/30. Cost of goods is \)33,000. Paul uses the gross method to record sales revenue.

25 Paul receives payment from the customer on the amount due.

Step-by-Step Solution

Answer

The total of debits and credits is $165,000.

Step 1: Meaning of Accounts Receivable

The accounting term accounts receivable indicates the customers to whom sales are made on a credit basis, and the amount is yet to be received. It is considered an asset and reported under the current asset section of the positional statement.

Step 2: Preparation of journal entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
Aug 1	Accounts receivable	66,000
	Sales revenue		66,000
Aug 1	Cost of goods sold	33,000
	Merchandise inventory		33,000
Aug 25	Cash	66,000
	Accounts receivable		66,000