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In double-entry bookkeeping, a sale of merchandise is recorded in the general journal as a debit to cash or accounts receivable and a credit to the sales account. [3] The amount recorded is the actual monetary value of the transaction, not the list price of the merchandise. A discount from list price might be noted if it applies to the sale.
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Accounts receivable represents money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms [citation needed] or payment terms.
For example, if fifty sales on account were made during one day, fifty ledger postings would have to be made to three general ledger accounts: Accounts Receivable, Sales, and Sale Tax Payable. In special journal, transactions are recorded in a single line, and the format of the journal made it possible to post only the total amount for each ...
The journal entry can consist of several recordings, each of which is either a debit or a credit. The total of the debits must equal the total of the credits, or the journal entry is considered unbalanced. Journal entries can record unique items or recurring items such as depreciation or bond amortization.
Contra-accounts are accounts with negative balances that offset other balance sheet accounts. Examples are accumulated depreciation (offset against fixed assets), and the allowance for bad debts (offset against accounts receivable). Deferred interest is also offset against receivables rather than being classified as a liability.
Using the rules of double-entry, these journal summaries are then transferred to their respective accounts in the ledger, or account book. For example, the entries in the Sales Journal are taken and a debit entry is made in each customer's account (showing that the customer now owes us money), and a credit entry might be made in the account for ...
These entries, referred to as postings, become part of a book of final entry or ledger. Examples of common financial accounts are sales, accounts [1] receivable, mortgages, loans, PP&E, common stock, sales, services, wages and payroll.
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