debit and credit journal entries-
Sold merchandise with retail value of $6,000 and a cost of $4,080 to Chang Corp., invoice dated Jan. 13.
To record this transaction through debit and credit journal entries, we need to understand the basic accounting equation: Assets = Liabilities + Equity.
In this transaction, we are selling merchandise to Chang Corp. The retail value of the merchandise sold is $6,000, and the cost of the merchandise is $4,080.
To record this transaction, we will use the following accounts:
- Sales Revenue: This is a temporary account that represents the revenue earned from the sale.
- Cost of Goods Sold (COGS): This is an expense account that represents the cost associated with the merchandise sold.
- Accounts Receivable: This is an asset account that represents the amount owed by Chang Corp.
- Inventory: This is an asset account that represents the merchandise held for sale.
Now, let's break down the debit and credit entries for this transaction:
1. Debit the Accounts Receivable account for $6,000: This increases the amount owed by Chang Corp. on their account.
- Accounts Receivable: $6,000 (Debit)
2. Credit the Sales Revenue account for $6,000: This recognizes the revenue earned from the sale.
- Sales Revenue: $6,000 (Credit)
3. Debit the COGS account for $4,080: This recognizes the cost of the merchandise sold.
- COGS: $4,080 (Debit)
4. Credit the Inventory account for $4,080: This reduces the value of inventory as the merchandise is no longer on hand.
- Inventory: $4,080 (Credit)
By following these debit and credit entries, we have properly recorded the transaction in the respective accounts. It is important to note that these entries may vary depending on your company's specific chart of accounts and accounting practices.