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Journal entry for the below transaction? Goods sold to customer, paid shipping on it. However, the customer will refund the shipping charges?

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Question added by Shujaat Pandit , Finance & Accounting Manager , Panworld Education
Date Posted: 2017/11/13
Joel Mondido
by Joel Mondido , Accountant/Auditor , Joel C. Mondido, CPA

Proposed entries:

Cash or accounts receivable (debit)

Sales (credit)

To record sales. This entry is used if the company is using periodic inventory system. If perpetual system, another entry is required as shown below.

Cost of sales (debit)

Inventory (credit)

 

Shipping expense or prepaid shipping (debit)

Cash or payable (credit)

To record payment of shipping charges

 

Accounts receivable (debit)

Shipping expense or prepaid shipping (credit)

To establish the eventual refund of the shipping charges

Khateeb Hussain
by Khateeb Hussain , Senior Branch Accountant , Medicas International

if the transaction is on credit:

Accounts receivable (customer's account) debit.

sales credit. 

cash or bank credit (by the amount of shipping charges paid).

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