Journal Entry Distributions—Credit Memos

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Credit memo transactions are posted to the General Ledger in the following manner:

Sales Journal

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

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

Note: 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.