Explanation Account receivable: The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable. Date Account Titles and explanation Debit ($) Credit ($) Accounts receivable 100,000 Sales 100,000 (To record the sale made ) Table (1) Accounts receivable is an asset and there is an increase in the value of asset. Hence, debit the accounts receivable by $100,000. Sales (Revenue) are a component of stockholder’s equity and there is an increase in the value of equity. Hence, credit the sales by $100,000. Date Account Title and Explanation Debit Credit Cash (2) 54,600 Factory expense (1) 8,400 Receivables from factor (3) 7,000 Accounts receivable 70,000 ( To record sale of receivables to the factor) Table (2) Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $54,600. Factory expense is a component of stockholder’s equity and there is an increase in the value of expense. Hence, debit the factory expense by $8,400. Receivables from factor are an asset and there is an increase in the value of asset. Hence, debit the receivables from factor by $7,000. Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the accounts receivable by $70,000. Date Account Title and Explanation Debit in $ Credit in $ Cash ( $ 7 , 000 − $ 1 , 316 ) 5,684 Sales revenue (4) 1,316 Receivables from factor 7,000 ( To record collection of remaining factory receivables by giving discount) Table (3) Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $5,684. Sales revenue is component of stockholder’s equity and there is a decrease in the value of revenue. Hence, debit the sales revenue by $1,316. Receivables from factor are an asset and there is a decrease in the value of asset. Hence, debit the receivables from factor by $7,000. Date Account Titles and explanation Debit ($) Credit ($) Cash 29,424 Sales revenue (5) 576 Accounts receivable ( $ 100 , 000 − $ 70 , 000 ) 30,000 (To record the sale made ) Table (4) Cash is an asset and there is an increase in the value of asset

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Chapter 6, Problem 10P

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Prepare journal entry to record the given transactions.

Solution Summary: The author explains that the amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.

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