CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Today’s Target! Tues., Jan. 26 th  Students will journalize sales and cash receipts using special journals Agenda Chapter 9 Chapter 9 Test B if not completed Chapter 10-1 Notes 10-1 WT/OYO 10-1 Application Chapter 10-2 Notes Guiding Question:  “Why do we have special journals?”

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Special Journals Name each of the special journals we have studied so far What is the purpose of each? Purchases Journal – record purchases of merchandise on account Cash Payments Journal – record transactions that involve cash payment 2 LESSON 10-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning SALES TAX Purchases and sales of merchandise are the two major activities of a merchandising business Customer – person or business to whom merchandise or services are sold Laws require that a tax be collected from customers for each sale made Sales Tax – tax on a sale of merchandise or services 3 LESSON 10-1 page 270

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning SALES TAX Sales tax is a percentage of sales Must file reports with government Need records of the amount of (1) total sales and (2) total sales tax collected Sales tax collected is a business liability until paid to the government agency Sales Tax Payable is a liability account and has a normal credit balance 4 LESSON 10-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning SALES OF MERCHANDISE ON ACCOUNT A sale of merchandise may be on account or for cash Increases revenue Regardless of when payment is made, the revenue should be recorded at the time of a sale, not on the date cash is received Realization of Revenue – when revenue is recorded at the time goods or services are sold 5 LESSON 10-1 page 271 A sale for which cash will be received at a later date is a “sale on account” and results in Accounts Receivable Accounts Receivable is an asset with a normal debit balance

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning SALES JOURNAL Sales Journal – special journal used to record only sales of merchandise on account Sale on account transactions can be recorded on one line of the sales journal using the special amount columns 6 LESSON 10-1 page 272

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Sales Invoice When merchandise is sold on account, a sales invoice is prepared Sales invoice includes: Goods or services sold Quantity Price Hobby Shack prepares three invoices – one for the customer, one for the shipping department and one as the source document 7 LESSON 10-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 10-1 SALES INVOICE page 272

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 10-1 SALE ON ACCOUNT page 273 November 3. Sold merchandise on account to Village Crafts, $540.00, plus sales tax, $32.40; total, $ Sales Invoice No Write the date. 6. Write the sales tax amount. 2. Write the customer name. 3. Write the sales invoice number. 4. Write the total amount owed by the customer. 5. Write the sales amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning TOTALING, PROVING, AND RULING A SALES JOURNAL At the end of each month, the sales journal must be totaled (add the columns), proved (check to make sure the debits equal the credits) and ruled (draw a single line above and a double line below the total) 10 LESSON 10-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 10-1 TOTALING, PROVING, AND RULING A SALES JOURNAL page 274

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Assignment 12 LESSON Work Together/On Your Own 10-1 Application

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Processing Sales Transactions 13 LESSON 10-2 Cash sale – sale in which cash is received for the total amount of the sale at the time of the transaction Credit card sale – sale in which a credit card is used for the total amount of the sale A customer who uses a credit card promises to pay the amount due for the credit card transaction to the bank issuing the credit card

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Processing Sales Transactions At the end of every day, the cash register prints a summary of the sales recorded Point-of-sale (POS) terminal – computer used to collect, store, and report all the information of a sales transaction Number, description, price, and quantity on hand of each item is stored in the POS terminal Clerk uses scanning device to scan universal product code (UPC) symbol Terminal summary – report that summarizes the cash and credit card sales of a POS terminal (source doc) 14 LESSON 10-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Processing Sales Transactions At any time, the POS system can produce a variety of informational reports to help management make decisions Report of sales by sales clerk would assist management to analyze a sales clerk’s efficiency Report of sales by time of day would assist management in scheduling sales clerks to match busy periods A report of merchandise having a quantity on hand below a predetermined reorder point alerts management to purchase additional merchandise. 15 LESSON 10-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 16 LESSON 10-2 PROCESSING SALES TRANSACTIONS pages UPC (Universal Product Code) Cash Register Receipt Point-of-Sale (POS) Terminal Receipt (continued on next slide)

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Processing Credit Cards Batch report – report of credit card sales produced by a POS terminal Can be detailed showing each sale Summary of the number and totals by card type Batching out – process of preparing a batch report of credit card sales from POS Electronically transmits to contracted bank Bank combines the batch reports for all customers and submits the information to the nearest Federal Reserve Bank. The funds are then transferred between banks. 17 LESSON 10-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 18 LESSON 10-2 PROCESSING SALES TRANSACTIONS page 277 Terminal Summary Batch Report (continued from previous slide)

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH RECEIPTS JOURNAL Cash receipts journal – special journal used to record only cash receipt transactions including cash and credit card sales AND cash received from business customers on account Sales discount – cash discount to encourage early payment by a customer with an account according to the terms of the account (2/10, n/30) 19 LESSON 10-2 page 278

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 20 LESSON 10-2 CASH AND CREDIT CARD SALES page 279 November 4. Recorded cash and credit card sales, $5,460.00, plus sales tax, $327.60; total, $5, Terminal Summary Write the date. 2.Place a check mark in the Account Title column. 3.Write the terminal summary document number. 4.Place a check mark in the Post. Ref. column. 5.Write the sales amount. 6.Write the sales tax amount. 7.Write the cash amount. 7

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 21 LESSON 10-2 CASH RECEIPTS ON ACCOUNT page 280 November 6. Received cash on account from Country Crafters, $2,162.40, covering S69. Receipt No Write the date. 2.Write the customer’s name. 3.Write the receipt number. 4.Write the credit amount. 5.Write the debit amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 22 LESSON 10-2 JOURNALIZING CASH RECEIPTS ON ACCOUNT WITH SALES DISCOUNTS page 282 November 7. Received cash on account from Cumberland Center, $1,176.00, covering Sales Invoice No. 74 for $1,200.00, less 2% discount, $ Receipt No Write the original invoice amount.1.Write the date. 2.Write the customer’s name. 3.Write the receipt number. 5.Write the amount of sales discount. 6.Write the debit to cash.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 23 LESSON 10-2 TOTALING, PROVING, AND RULING A CASH RECEIPTS JOURNAL page 283

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CREDIT MEMORANDUM Sales return – credit allowed a customer for the sales price of returned merchandise, resulting in a decrease in the vendor’s accounts receivable Sales allowance – credit allowed a customer for part of the sales price of merchandise that is not returned, resulting in a decrease in the vendor’s accounts receivable Credit memorandum – form prepared by the vendor showing the amount deducted for returns and allowances 24 LESSON 10-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 25 LESSON 10-3 CREDIT MEMORANDUM FOR SALES RETURNS AND ALLOWANCES page 285

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 26 LESSON 10-3 JOURNALIZING SALES RETURNS AND ALLOWANCES page 286 March 11. Granted credit to Village Crafts for merchandise returned, $58.50, plus sales tax, $3.51, from S160; total, $ Credit Memorandum No Write the date.6.Write the sales tax amount. 2.Write Sales Returns and Allowances. 7.Write the accounts to be credited. 3.Write CM and the credit memorandum number. 8.Draw a diagonal line in the Post. Ref. column. 4.Write the amount of the sales return. 9.Write the total accounts receivable amount. 5.Write Sales Tax Payable.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Assignment 27 LESSON and 10-3 Work Together / On Your Own 10-2 and 10-3 Application