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Hello,
Usually, when a sale is made, Revenue is credited and Receivable is debited. However, in the note (i) of Atlas June 2013, when the sale is reversed, only Revenue is decreased and there is no entry in receivables. Why?
And when loan is recognised, we usually debit cash and credit loan. But here, only loan was credited and no entry was made for cash , why?
Oh Rebecca!
Let’s go through this, one step at a time
“Sell” the maturing inventory to Xpede for $10,000,000
Dr Cash 10,000,000
Cr Revenue 10,000,000That’s what HAS happened
What SHOULD have happened is Dr Cash 10,000,000
Cr Loan 10,000,000There are two ways to deal with this
1) Undo the bad entry and put through the good one
So, Dr Revenue 10,000,000
Cr Cash 10,000,000and put through the right one
Dr Cash 10,000,000
Cr Loan 10,000,000OR …….
2) Recognise that the debit in Cash is ok but the credit to Revenue is wrong
To correct, take it out of Revenue and put it into Loan (and that’s what the printed solution has done)
Dr Revenue 10,000,000
Cr Loan 10,000,000Is that OK?
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