Question

The following are selected transactions of XYZ Ltd:

12 July   Sold goods on account to ABC Ltd for $2400, terms 3/10, n/30. The cost of the goods sold was $1600.

19 July   Forwarded a credit note for $180 to ABC Ltd covering part of the goods sold on 12 July, which cost $120, that were returned by ABC Ltd as inappropriate. The goods returned were not defective.

21 July   Received from ABC Ltd a cheque in full settlement of the above transactions.

Both XYZ Ltd and ABC Ltd use perpetual inventory system. Assuming that neither business is registered for GST.

Required

Record the above transactions in the general journal of

(1) XYZ Ltd (5.5 marks), and

(2) ABC Ltd (3.5 marks)

Answer 1

Transactions in the general journal of XYZ Ltd :-

Date	Particulars and Account Titles	Dr.	Cr.
12-Jul	ABC Ltd.	$ 2,400.00
	Sales Revenue		$ 2,400.00
	Cost of Goods Sold	$ 1,600.00
	Inventory		$ 1,600.00
	(Being Sale of Goods on credit recorded)
19-Jul	Sales Returns	$     180.00
	ABC Ltd.		$     180.00
	Inventory	$     120.00
	Cost of Goods Sold		$     120.00
	(Being Sales Return Recorded & Credit Note issued)
21-Jul	Bank	$ 2,153.40
	Discount	$        66.60
	ABC Ltd.		$ 2,220.00
	(Final Payment as per terms 3% discount allowed)

Transactions in the general journal of ABC Ltd :-

Date	Particulars and Account Titles	Dr.	Cr.
12-Jul	Inventory	$ 2,400.00
	XYZ Ltd.		$ 2,400.00
	(Being Goods purchased on credit recorded)
19-Jul	XYZ Ltd.	$     180.00
	Inventory		$     180.00
	(Being Purchase Return Recorded)
21-Jul	XYZ Ltd.	$ 2,220.00
	Discount Received		$        66.60
	Bank		$ 2,153.40
	(Final Payment as per terms 3% discount received)

Notes:-

1. Since no chart of account is given, the most appropriate account titles have been used which may vary from the bookish answers.

2. The books of ABC Ltd. have been recorded directly , it may also be recored using a purchase account and then moving from purchase account to inventory account. Also the discount received may also be adjusted with the Inventory, depending on the country and GAAP applicable thereon.

3. The terms 3/10, n/30 are standard in business commerce which implies that a 3% discount would be allowed on the Net invoice value payable, if the payment is made within 10 days. It also means that even if the customer does not want the discount, he still has to clear the payment withing a period of 30 days from the invoice date.

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