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Dear sir,
I have a confusing problem below. Could you please let me know whic one is correct.The following is an extract of Teri’s cash receipts book for November:
Date allowed Detail Bank Receivables Cash sales Early settlement discount
8 Nov A. Ahme 800 850 50
B 420 420
C 615 630 15
D 160 160
1995 1480 580 65None of these customers were expected to take advantage of the early settlement discount when the sales invoices were issued.
What is the correct double entry to post the transactions into the ledger accounts?
===>The answer is Dr Bank 1995, Cr Receivables contrl 1480 Cr Revenue 515, right?
or Dr Receivables contrl 1480 Dr Revenue 515, Cr Bank 1995 right?
which one is correct?
I am still confused about double entry even after reading I read the problem solving below.Teri has received a total of $1,995 in cash.
$580 of this was from cash customers and related to cash sales so this amount should be credited to revenue.
The $65 is settlement discounts that customers were not expected to take and therefore revenue must be adjusted accordingly (580-65=515). The remaining $1,480 in cash relates to receivables balances.
I cannot make sense of the question as you have typed it. Maybe it is because the columns aren’t in line, but where on earth are totals of 1480 and 580 coming from?
Having said that, your second possible answer certainly could never be correct. They have received cash and so we Debit Bank – we certainly do not Credit Bank!!
Surely you have an answer in the same book in which you found the question? What does the answer say?
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