You may occasionally need to record a credit memo or discounted sale, write off bad debts, or enter an NSF check.
Follow the same procedure as for accrual-basis accounting. However, in the entry, replace the Accounts Receivable account with the Receivables Bank account.
Entering Credit Memos. For inventory items, the credit memo entry debits the inventory asset and revenue accounts, and credits the bank and cost of goods sold accounts. For non-inventory items, it debits the revenue account and credits the bank account.
Entering Early-Payments Discounts. The discounted-sale entry debits the Discount Expense account by the amount of the discount, and reduces the amount debited to the bank account by the same amount.
Writing Off Bad Debts. The entry debits the Bad Debts expense account and credits the bank account.
Recording NSF Checks. The entry to record an NSF check voids the debits and credits of the original entry.