Instructions
All cash transactions are to be entered in the cash book whether listed under “Cash” above or not. In recording a cash sale or cash purchase in the cash book, extend the amount into the “General Ledger” and “Net Cash” columns only.
Be sure to classify and post all items correctly, inasmuch as a wrong classification or posting may necessitate many correction entries.
The claim against the railroad company will be charged to Sales Returns and Allowances until a settlement is effected. Such items are often charged to a Freight Claims account, with suitable adjustment to Sales Returns and Allowances when settlement is made for less than the amount claimed.
The word “balance,” as in the phrase, “Falk & Taylor, balance of January bill $5,447.60 less 2%,” calls attention to an adjustment of some sort—returns or allowance—which has been or is to be considered in determining the amount still due.
Charge the freight and haulage to In-Freight and Cartage.
Great care must be exercised in the general journal entries affecting individual customers’ and creditors’ accounts, since these also affect their respective controlling accounts. Inasmuch as the general journal does not provide the customary analytic columns, it will be necessary, when making every such entry, to indicate the controlling account affected and, when posting, to post the item both to the individual account and to the control account. The following illustrations should be followed in making entries of this kind:
| (1) | Sales Returns and Allowances | 12 | 500.00 | |||
| Falk & Taylor (Accounts Receivable) | 26/1 | 500.00 | ||||
| (2) | Carter Dry Goods Co. (Accounts Payable) | 33/6 | 897.80 | |||
| Purchases Returns and Allowances | 18 | 897.80 | ||||
| (3) | Notes Receivable | 1 | 5,218.08 | |||
| Sales Discount | 20 | 274.64 | ||||
| Century Dress Co. (Accounts Receivable) | 25/1 | 5,492.72 | ||||
Note particularly the way in which the ledger folios are shown for both accounts.
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