Module 1: Control for debtors and creditors

XSIQ
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Accounting - Credit note accounting equation

Credit note accounting equation

For the party returning the goods (Stewart) the effect on the accounting
equation is:

* an decrease in the asset stock

* a decrease in the liability creditors

For the party receiving the returned goods (Alex) the effect on the
accounting equation is:

* an increase in the asset stock

* a decrease in the asset debtors

These transactions may be recorded in the general journal in the manner
stated above.

Reasons for goods being returned include:

* the goods are damaged

* the goods are not in the quantity ordered

* the goods do not match the description

* the goods do not meet the quality required

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