 980 though it's going to be a credit of the 1000. Notice that if I put a credit of 980 and I posted it here we would show that C still owes us $20 and they don't. So we have to take it off for the 9000. That means we need another debit here and I know it's not an order. I've got the two debit on top and debit on the bottom. To me it makes kind of sense to put it in this order though because this is the first thing I think about is cash affected. The receivable has to go down. The plug is the difference to me. We can calculate it a couple different ways. The plug is the discount. So we could say that the plug is 1000 times .02. The discount $20. We could also say well it's the 1000 minus the 8, 980 which is $20. That's the plug formula to me. So the plug formula in this type of situation could be a negative sum of these four cells meaning what's in these four cells 980 minus the 1000 then flip the sign. I don't want a negative 20. I want a positive 20. That's why we hit negative instead of equals. Now that gives us positive 20 then if I highlight all these cells it adds up to zero. So what's that account going to go to? That account will go to sales discount. We gave a sales discount. Why sales discount? You might be thinking hey you know what we overestimated sales by a thousand when we're only going to get 980. Why don't we reduce sales by that amount? And that would be a reasonable assumption but we don't usually reduce sales. So we made up another account. It's kind of a contra sales account because it's really going to go in the sales area on the on the income statement but it's going to act like an expense meaning it's going to have a debit balance. It's going to bring down net income. So I'm going to copy that. I'm going to paste it 123. Okay so let's post this out. I'm going to make it a little bit smaller again so we can see it all on one. Hopefully that's not too small. That'd be too small. Make it a little bit larger. Okay I'm going to go up the cash. I'm going to double click on it and plus and I'm going to scroll down a little bit and go to this 980 and enter and there's the cash. We're going to go to a council symbol right under it. Going to double click on it. Go to the end of it and plus I'm going to point to this credit of 1000 and enter and then we're going to go to the sales discount which is down here on N12 equals and point to the 20 and then enter and that brought net income down by the 20 and we have the receivable went all the way down to zero. We also need to record that in C over here because C no longer owes us we're going to say equals the 1000. So notice that they owe us nothing anymore even though they only paid us 980. All right I'm going to make this a little bit larger and we're going to in order to do the next couple problems we want to open up that next blue area so that we're not going to keep going down down down. So we can see remember we hit some cells I'm going to unhide cells so notice it goes A B C D E L and that L doesn't go with the song so we're going to then highlight these cells and then unhide that. So put your cursor on the cell E so it has a drop down left click and then drag over to cell row column I should say L let go and then put your cursor on the selected area right click go down to unhide and that'll give us the the next cells that we have here then I'm going to go ahead and hide these cells because I don't need to see these cells if I have a problem with them I'll have to go back and unhide them but I think they're okay right now so I'm going to put my cursor on the B drop down left click scroll over to column F let go right click on the selected area and hide those cells. Okay so maneuvering around the excel sheet you can learn a lot to to maneuver around the excel sheet can be very helpful to do so. All right so now let's look at the next section we're on column G now where it says 716 we say paid balance due to B company within the discount period. All right so now we're paying the balance due in the discount period to B company so if we scroll over here we can see that we owe B company 6,500 so and we paid it within the discount period so if we scroll back over here we're looking okay where did we buy something from B company oh it's the first thing so yeah we had terms 2 15th we paid it within the 15 days and we're going to get a 2% discount on that 6,500 so first thing I usually think of is is cash affected in this case it is because we paid off the the cash so cash is a debit balance we're going to make it go down by doing the opposite thing to it which in this case is a credit so I'm going to copy the cash I'm going to put it on the bottom in h6 right click paste it 123 and now we're going to have to think about well how much cash did we pay so if we scroll over there if we got a 2 discount pull off the calculator and we paid 6,500 times 0.02 for 2% we got a 130 discount minus the original payment 6,500 there we have that now again if you got a discount and you're going through the store and you got your calculating discounts on your phone then we could do that a little bit easier with one calculator we could say well the sticker price 6,500 times and if there's a 2% discount 100% minus 2% means we're going to pay 0.98% 98% so that's another way we can get this uh 6,370 it's probably a little quicker if you're doing those on the fly so we're going to say this I'm going to make it a negative to flip the sign uh 6,500 times 0.9898% how much we're going to pay so there's that amount and we're paying off then the accounts payable this amount needs to go down that's a credit we're going to make it go down by doing the opposite thing to it the bad thing is going down because we're paying it off and therefore we're going to debit it it's going to right click paste 123 on the debit side we're not going to debit it first 6,370 though because if we did know what would happen is we'd still be showing that we owe money to be we don't owe be any money we were completely paying them off we're getting a discount because we paid within the 15 days so we're going to debit the full amount of 6,500 and then you're going to say well the debits don't equal the credits we're going to need another credit and what's that credit going to be called you might think it should be a discount but that's the sales discount that's the discount that we give to the people that we sell to in this case what really happened we bought merchandise and we put it on the books for too much we put it on the books for 6,500 but it really only costs us 6,370 so merchandise really needs to go down we overbooked it because we got a sale on it so we need to make it go down it has a debit balance how do we make something with a debit balance go go down we do the opposite thing to it which in this case is a credit so the credit the discount is actually going to go to inventory which can be a little confusing when you're trying to think between who got the discount so when we when we are purchasing we got a discount we're lowering the merchandise inventory again we can calculate it a couple different ways we could say it's 6,500 times 0.02 right we can also say well it's the plug it's 6,500 minus 6,370 it's the 130's plug so i'm going to do it that way i'm going to use our plug formula i'm going to flip the sign with a negative instead of an equals sqm and sum up these four sales so take those sales sum them up you would come up with a positive 130 but i want you to flip the sign and make it negative why because i want to credit so that my debits equal my credits when we add them up like so let's post that out and see what happens we're going to double click on accounts payable i'm going to go to the end of it i'm going to say plus and i'm going to go to the 6,500 i'm going to double click on the cash and note that some of these sales obviously you can't see because we hid them so you got to be a little bit careful if you delete some of the sales now make sure to undo it or whatever uh so that uh you or you're going to have to unhide the sales and post them again so hit plus and i'm going to go to the 6,370 and enter and then we're going to go to merchandise inventory double click on that go to the end of it and plus and we're bringing that down by the 130 and there we have that now we also have to record it down here on the payable 4b so i'm going to put it in the debit side we're going to say equals and we're going to point to the 65 we don't owe them anything anymore so this should go down to zero we're back in balance represented by the green number down here all right so let's see what else happens on 719 says we sold merchandise to a company terms 215 uh i'm assuming that's in 60 so that means we're going to give them a 2 discount if they pay within 15 days otherwise we give them that gracious 60 day time period on which to pay us and uh so therefore we don't need to know that once again to post this we need to know that when we pay it off because we're going to assume they're not going to be within the 15 days and post it at the full price in this time is cash affected nope uh we got we didn't get cash we got an AR we got a accounts receivable we got an iou accounts people has a debit balance we're going to make it go up by doing the same thing to it which in this case will be another debit so i'm going to right click paste it 123 and post notice there's two amounts here we're going to have two accounts related to the sales price two accounts related to the cost so we've got 180 on the sales price in this case and we're going to have to credit something what's that credit going to be for income revenue or we call it sales if we sell merchandise uh sales is an income statement account an income account a revenue account has a credit balance it only goes up for the most part we're going to make it go up by doing the same thing to it which in this case is another credit all right so then if we post this out i'm going to double click on the receivable there's a zero in it but i'm not going to just delete this here i'm going to double click on it i'm going to go to the end of it so that we can represent all the numbers that are in there and say plus and point to the receivable here and enter then i'm going to go down the sales in in 10 double click and go to the end of it and plus and then point to the receivable here and enter now as we're going we might want to point that post that over here a now owes us money so we have a red number because that doesn't tie out to our receivable here so i'm going to say that equals the accounts receivable and enter so now it adds up to 1800 1800 we're good now we need to record the second half of this transaction which of course is the cost of the inventory we know that we gave up inventory we know that inventory has a debit balance we know it needs to go down so we're going to do the opposite thing to it which is a credit i'm going to copy that skip a line skip another line because i want it on the bottom so i'm going to put it in line 13 right click paste it 123 going to go to the credit side j 13 negative and the cost being 1200 we're going to have a debit related to that same amount so i'm going to make it negative of that number we could just type it in there that would be fine and that's going to be an expense for the cost of the merchandise that we sold in order to help us generate this revenue called cost of good sold cost good sold an expense it has a debit balance like all expenses generally only goes up like all expenses and we're going to make it go up again by doing the same thing to it which in this case is a debit so i'm going to double click on that and post this out going to double click go to the end of it plus we're going to point to the 1002 once we do this net income will go down and remember what net income is revenue of five less the expenses is the net income then merchandise income merchandise inventory going to double click over here go to the end of it and plus point to the 1002 and enter puts us back in balance note the effect on net income increase by 18 less the expense of 12 balance 600 that's what the bottom line is from that transaction all right so now we're on 721 where it says credit memorandum to a for merchandise that was damaged okay so we're going to send a credit memorandum from a for merchandise that was damaged so a's saying that this merchandise was damaged and we're going to give them the money back if they have paid us but they have not yet paid us in this case they have money owed to us on account so therefore is cash affected know what really happens is the receivable the amount that's owed to us needs to go down by the damaged goods so receivables has a debit balance we're going to make it go down by doing the opposite thing to it which in this case is a credit so i'm going to copy that i'm going to put it on the bottom and we're saying that the damage goods were for 300 i'm going to put a credit negative 300 then we're going to debit something now if they give us it back maybe we would debit the inventory but if it's damaged and we're not going to take it back then we're going to have to debit something else and once again you might be saying well why don't we debit sales because really what happens we put it into sales and the sales didn't ever really happen because the thing was damaged and we had we didn't get the money but we don't usually make sales go down so what we do is we make a contra sales account which kind of acts like an expense meaning it has a debit balance brings net income down called sales returns and allowances why is it a contra sales account because when we put it on the uh income statement it will be in the revenue section not the expense section generally but it acts like an expense for the most part all right so there we have that and we're going to go ahead and post that out we're going to say this equals and sell in 11 point to the 300 that will make this go up bring net income down then we're going to go to the accounts receivable i'm i'm going to be and sell in six double click go to the end and plus and point to the receivable of 300 that will bring us back in balance okay now we're also going to have to point that out over here a is the one that gave the return so i'm going to put our cursor in v eight equals