In this world, everything has stand on the base of anything. For example, the building is standing its base. Big tree stands on its root base. The earth is standing in the sky with gravity of universe base. Like this, accounting base is its fundamental terms knowledge. More you have the knowledge of accounting words, you will become more strong in accounting.
For passing this simple journal entry for a credit memo.
You have the base of knowledge of four terms in it
Q: - 1. What is a credit memo?
Q: - 2. What is journal entry?
Q: - 4. What are the rules of journal entry?
Q: - 5. Which rule will apply on this?
Come and learn each thing one by one.
Q: - 1. What is a credit memo?
Credit memo is a credit note. If you are Indian accountant, you know better about credit note than credit memo. And now, passing of journal entry of credit memo will be the journal entry of credit note.
Ok, again, revise if you do not know credit note. Credit memo or credit note is a document which is issued by seller to its customer when customer returns the goods due to any reason ( it may be default, it may be incorrect or defective or even in damaged due to transport reason). It is also evidence that sale return means there is decrease in the actual sale both quantity and amount. There are lots of information but one of original invoice reference is must in it.
Q: - 2. What is journal entry?
Already written its answer, read at here.
Q: - 3. What are the rules of journal entry?
Already written its answer, read at here.
Read answer 2 and 3 before answer 4 and main answer
Now come to the answer of main question
In the book of Creditor or Seller
It is the person who wrote the credit note. It is the person who sold on credit. Now, the goods come to him. So, his stock asset has increased. So, sale return account debit and the buyer to whom he has to take money and now there is no right because he returned the stock, so, seller has to write credit to debtor account because this receivable amount from debtor has decreased.
Sales return account Debit
Debtor Account Credit
Now say big
After credit memo
Asset of stock in the pocket of seller has increased
Asset of debtor's receive money has decreased
Law apply
Assets increases debit
Asset decreases credit
So, you get answer of your 4th question.
If you do not know who is debtor and who is creditor and this entry is impossible. Because you can not understand what is happening.
So, clear your base
Who is debtor
Who is creditor
by reading our accounting dictionary.
In the book of Debtor or Customer or Buyer
Creditor Account Debit
Sale Return Account Credit
Now, imagine you are buyer and you returned your damaged goods. It means, you have got success to save your money which you have to pay to your seller for damaged goods.
Now, you have passed above entry because
You have decreased Liability
Decrease of liability is also your saving
You have decrease your asset
Say big
Decrease the liability will debit
Decrease the asset will credit.
So, creditor is our liability and now it has decreased because the money payable to creditor will not pay because sale return
Sale return is also decrease our asset because now we have no right on same goods.
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