Journalize the following transaction.

Question

Company XYZ sold goods for $ 1000 to company ABC on April,01,2023, on April 30, $ 995 was received with full settlement,

Answer 1

If the full cash amount received was 995 then 1 of two things could have happened.

1. An allowance or return of 5 dollars

In this case the initial entry was:

Accounts receivable 1,000

Sales revenue 1,000

Sales returns and allowance 5

Accounts receivable 5

Full settlement

Cash 995

Accounts receivable 995

2.He received payment terms of 0.5% off by paying within a specified period

Cash 995

Sales discount 5

Accounts receivable 1,000

Answer 2

Company XYZ journal entries:

April 1, 2023

Debit; Accounts Receivable 1,000

Credit: Revenues 1,000

April 30. 2023

Debit: Cash 995

Debit: Discount Expense or Loss (*) 5

Credit: Accounts Receivable 1,000

(*) Need to provide more info. on why it was settled at $995 instead of $1,000.