Credit memo transactions are posted to the General Ledger in the following manner:
|
Transaction |
Debits |
Credits |
|---|---|---|
|
Credit memo |
Sales Income, Freight, and Sales Tax Payable |
Accounts Receivable* |
|
Sale of non-stock, labor or service items |
Salary and Wage Expense (or miscellaneous item expense) |
Cost of Sales |
|
Sale of stock or assembly items |
Inventory |
Cost of Sales |
*For companies using the cash-basis accounting method, Accounts Receivable is replaced with <Cash Basis> and is not recorded in the General Ledger. Instead, income and cash are recorded when the credit memo is used in Receipts.