Moving from “Sole    Proprietorships” to     “Merchandising     Corporations!!!” Chapter 14:Accounting forSales and Cash  ...
Essential Outcomes14. Understands the relationship between  sales, cash sales and sales tax by  being able to:   a. Explai...
Merchandising Businesses Sell Merchandise: goods that arepurchased for resale to customers.
1.                     Purchase                    merchandis                    e for resale                             ...
New account for Merchandising               Business: Merchandise Inventory:   Merchandise: goods bought for resale  In...
New account for Merchandising              Business: Sales Account:  Used when a retail merchandising business   sells g...
Sales Transactions Sale on account Sale of merchandise that will be paid for at  a later date• Charge customer: Person ...
Sales Slip Sales Slip:   date of sale   name of   customer   description,   quantity & price   of items sold  Pre-num...
 Added to the sale price of an item Usually given as %, such as 7%, etc. Paid by customer and collected by  business B...
 Multiply the total sales by the  percent. Example: total sales $510 and  sales tax is 7%    $510.00 x 7% (.07) = $35.70...
Credit Terms Credit Terms: state the time allowed  for payment for customers who  purchased merchandise on account Credi...
Account Receivable Subsidiary Ledger
Accounts Receivable Subsidiary Ledger Businesses that have lots  of people charging on  account, set up “accounts  receiv...
Accounts Receivable Subsidiary Ledger A/R Subsidiary Ledger is book or ledger  that provides detailed information for  ea...
Accounts Receivable Subsidiary Ledger Form
Recording Sales "on account"
Accounts Receivable Subsidiary Ledger On Dec 1, sold merchandise on account to Casey Klein for $200 plus sales tax of $12...
Sales Returns & Allowance Sales Returns: Customer returns  merchandise due to wrong size, wrong  color, defective, etc.—a...
Credit Memorandum Source document for sales returns and allowances is a “credit memorandum”.
Sales Returns & Allowance Account Reduces or decreases total revenue  earned by the business Returns or allowances recor...
Sales Returns & Allowance Account To record a return or an allowance charged “on account”:Sales Returns & Allowances  $45...
Posting to the Accounts Receivable         Subsidiary Ledger
Posting Accounts Receivable You will be posting twice   1. Once to the General Ledger      Accounts Receivable account   ...
When Posting Account Receivables….1. Do the following:    First, post as we have always    done—go to GL record info, com...
Cash Receipts
Kinds of Cash Receipts1. Cash receipt: a   transaction in   which money   comes in to a   business2. Three most   common f...
Cash Sales1. Business receives full payment at     time of sale2.   Cash registers record daily sales on     two tapes: on...
Bankcard Sales1. Bank cards issued by bank and   honored at many business2. Bank card sales are separate from   Cash Sales...
Journal Entry for Cash Sales            & Bankcard Sales1. Cash Sales journal entry:        Cash in Bank             $3392...
Cash/Sales Discounts1. Cash discount or sales discount:   amount that a customer can deduct   from the total owed for payi...
Cash/Sales Discounts1. Example: Total of bill is $1,250.00.  Sales/Cash Discount: 3/15, n/30$1,250.00 x .03 = $37.50 sales...
Journal Entry1. Cash in Bank        $1,212.50   Sales Discount       37.50         A/R-Name of Company  $1,250.00
That’s all folks!!! Now, on to our workbooks for some hands on work!
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Acct chapter 14

  1. 1. Moving from “Sole Proprietorships” to “Merchandising Corporations!!!” Chapter 14:Accounting forSales and Cash Receipts
  2. 2. Essential Outcomes14. Understands the relationship between sales, cash sales and sales tax by being able to: a. Explain the difference between a service business & a merchandising business. b. Explain the difference between a retailer & a wholesaler c. Record a variety of sales and cash receipt transactions in a general journal d. Calculate sales tax, sales discount and sales returns & allowances e. Define the accounting terms in this
  3. 3. Merchandising Businesses Sell Merchandise: goods that arepurchased for resale to customers.
  4. 4. 1. Purchase merchandis e for resale 2. Sale of 5. goods for Profit cash or on account 4. Pay expenses: 3. Collect rent, utilities, cash from salaries, etc. accounts Operating Cycle ofMerchandising business
  5. 5. New account for Merchandising Business: Merchandise Inventory:  Merchandise: goods bought for resale Inventory: items of merchandise the business has in stock Merchandise Inventory Account: inventory is represented in the General Ledger as an asset Normal Balance: Debit Items in the Merchandise Inventory account are sold during the year and more items for resale are purchased during the year Merchandise Inventory ONLY USED when recording adjusting entries
  6. 6. New account for Merchandising Business: Sales Account: Used when a retail merchandising business sells goods to a customer, the amount of the merchandise sold is record in the “Sales” account. Normal balance: credit
  7. 7. Sales Transactions Sale on account Sale of merchandise that will be paid for at a later date• Charge customer: Person to whom the sale on account is made• Credit Cards: issued by businesses so customers can charge purchases
  8. 8. Sales Slip Sales Slip:  date of sale  name of customer  description, quantity & price of items sold Pre-numbered  includes sales tax
  9. 9.  Added to the sale price of an item Usually given as %, such as 7%, etc. Paid by customer and collected by business Business required to periodically send money to state Account used: Sales Tax Payable Normal balance: credit State Sales Tax
  10. 10.  Multiply the total sales by the percent. Example: total sales $510 and sales tax is 7% $510.00 x 7% (.07) = $35.70 $510.00 + $35.70 = $545.70 total price Calculating Sales Tax
  11. 11. Credit Terms Credit Terms: state the time allowed for payment for customers who purchased merchandise on account Credit term is: n/30  “n” stands for net (or total amount of the sale) & 30 stands for number of days customer has to pay bill
  12. 12. Account Receivable Subsidiary Ledger
  13. 13. Accounts Receivable Subsidiary Ledger Businesses that have lots of people charging on account, set up “accounts receivable subsidiary ledger” A/R subsidiary ledger has account forms for “each” customer who charges on account
  14. 14. Accounts Receivable Subsidiary Ledger A/R Subsidiary Ledger is book or ledger that provides detailed information for each client (not part of General Ledger) In General Ledger, have Accounts Receivable account that equals total of all accounts in A/R subsidiary ledger Accounts Receivable is a “controlling account”—has a summary of all information recorded in the A/R Subsidiary Ledger
  15. 15. Accounts Receivable Subsidiary Ledger Form
  16. 16. Recording Sales "on account"
  17. 17. Accounts Receivable Subsidiary Ledger On Dec 1, sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50 Slash means you will post to two different places….On top of slash record account # and
  18. 18. Sales Returns & Allowance Sales Returns: Customer returns merchandise due to wrong size, wrong color, defective, etc.—any merchandise returned for credit or cash refund called sales return. Sales Allowance: customer finds merchandise or damaged or defective, but is still useable, seller may grant a price reduction if customer willing to keep merchandise—thus, this is called a sales allowance
  19. 19. Credit Memorandum Source document for sales returns and allowances is a “credit memorandum”.
  20. 20. Sales Returns & Allowance Account Reduces or decreases total revenue earned by the business Returns or allowances recorded in Sales Return & Allowance account Sales Returns & Allowances is “contra account to Sales Account Contra Account: means that its balances decreases the contra revenue account (this would be Sales)
  21. 21. Sales Returns & Allowance Account To record a return or an allowance charged “on account”:Sales Returns & Allowances $45.00Sales Tax Payable 5.00 Accounts Receivable/Casey Klein $50.00 Credit Memo 560 Usually only give cash refunds for “cash sales” and not for “on account
  22. 22. Posting to the Accounts Receivable Subsidiary Ledger
  23. 23. Posting Accounts Receivable You will be posting twice 1. Once to the General Ledger Accounts Receivable account 2. Once to the Accounts Receivable Subsidiary Ledger under the specific customer’s name
  24. 24. When Posting Account Receivables….1. Do the following:  First, post as we have always done—go to GL record info, come back and on top of slash, record A/R account number  Second, go to customer in A/R Subsidiary Ledger, record info, go back to GJ and place a check mark below the slash.
  25. 25. Cash Receipts
  26. 26. Kinds of Cash Receipts1. Cash receipt: a transaction in which money comes in to a business2. Three most common forms of cash for a merchandising business are:  Payments from charge customers  Cash sales
  27. 27. Cash Sales1. Business receives full payment at time of sale2. Cash registers record daily sales on two tapes: one customer receives and one is kept inside cash register3. End of day, cash register totaled and cleared4. A proof is usually made to make sure cash in register equals the cash register tape5. Tape used for proof becomes source document for journal entry for cash sales
  28. 28. Bankcard Sales1. Bank cards issued by bank and honored at many business2. Bank card sales are separate from Cash Sales3. Bank card sales are included on the Cash Register sales slip4. Record separately from the Cash Sales
  29. 29. Journal Entry for Cash Sales & Bankcard Sales1. Cash Sales journal entry: Cash in Bank $3392.00 Sales $3,200.00 Sales Tax Payable 192.002. Bank Card Sales journal entry: Cash in Bank $2,650.00 Sales $2,500.00 Sales Tax Payable
  30. 30. Cash/Sales Discounts1. Cash discount or sales discount: amount that a customer can deduct from the total owed for paying early2. Terms would look something like this: 2/10, n/303. 2/10: Customer receives a 2% (.02) discount if pay within 10 days4. n/30: do not pay without 10 days, have 30 days to pay full amount
  31. 31. Cash/Sales Discounts1. Example: Total of bill is $1,250.00. Sales/Cash Discount: 3/15, n/30$1,250.00 x .03 = $37.50 sales/cash discount$1,250.00 - $37.50 = $1,212.50 Total owed if pay within 15 daysOtherwise, must pay the full amount after 15 days.
  32. 32. Journal Entry1. Cash in Bank $1,212.50 Sales Discount 37.50 A/R-Name of Company $1,250.00
  33. 33. That’s all folks!!! Now, on to our workbooks for some hands on work!
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