How to Adjust Journal Entries for Customer Credit
Accounting journal entries record all business transaction that a company engages in. This process is especially important when keeping track of sales on credit. When you advance a customer credit for a business transaction, it's vital to not only make a journal entry for the initial credit amount but to make adjusting journal entries to keep track of how much the customer owes the company at all times.
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Instructions
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Place the date of the adjusting entry into the general journal at the beginning of the first line of the entry.
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Account for the credit transaction by listing the credit account name under the title section of the journal next to the date. For example, a $5,000 credit sale to customer John Smith would be listed as, "Accounts Receivable -- John Smith." Place the amount of the transaction, 5,000 in the debit column of the line.
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Account for the addition in sales for the company on the next line of the ledger. Indent slightly in the title area and list "Sales" to add funds to the sales account. Place the amount of the credit sale in the credit column for the line.
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Adjust the journal when a customer pays on his credit account on the date of the payment. Place the date on a new journal line, followed by "Cash" in the title section. Put the amount that the customer pays in the debit column indicating an addition to the company's cash account. If John Smith pays the full $5,000 of his credit account, the entry would read, "Cash" with "5,000" listed in the debit column.
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Continue the adjustment for the credit payment on the next line. Indent the line slightly, and then place the customer account name in the title section, followed by the amount paid in the credit column. John Smith's $5,000 payment would read as "Accounts Receivable-John Smith," with "5,000" in the credit column to show that John Smith's receivables account is $5,000 smaller.
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References
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