Question

Please explain this solution, the company refund $300 that means the company should have decreased account receivable or other accounts, then why Account receivable (asset) on Debit side which is increase?

2. A debtor paid $2,550 cash for prior services rendered with the credit going to accounts receivable. The debtor, however, misread the amount and they should have only paid $2,250. It has been decided to refund the difference to the debtor. Date Particulars DR Dec 31 Accounts Receivable 300 Cash at Bank 300

they refund by cash so credit side makes sense.

Answer 1

Entry for rendering service :-

	Debit	Credit
Account receivable	2,250
Service revenue		2,250

Entry for payment from debtor :-

Cash	2,550
Account receivable		2,550

Debtor paid extra 300, here debtor balance is -300, therefore, this needs to be get to zero. So Account receivable is debited.

Account receivable T-account

	Amount		Amount
Service revenue	$2,250	Cash	$2,550
Cash	$300
	$2,550		$2,550