Accounting for sales and cash receipts Chapter 14

Acct’g for a Merchandising Business Retailer – a business that sells to the final user Wholesaler – a business that sells to retailers

Operating Cycle of a Merchandising Business Figure 14-1 (pg 380) Purchase Goods Sell Goods Cash or Credit Pay Expenses Profit See Chart of Accounts on Pg 381 What’s different compared to Pg 79

Accounts used by a Merchandising Business Merchandise Inventory Account Asset Merchandise – Goods bought for resale Inventory – Merchandise a business has in stock Sales Account Revenue Problem 14-1

Analyzing Sales Transactions Sale on account Credit sale, charge sale Charge customer Credit Cards Bank vs. Nonbank credit cards Nonbank credit card sales are recorded as credit transactions.

Analyzing Sales Transactions Sales slip – a form that lists the details of the sale Sales tax – Sales Tax Payable Not everyone pays sales tax Credit terms – state the time allowed for payment n/30; net 30

Accounts Receivable Subsidiary Ledger Accounts Receivable Subsidiary Ledger – A separate ledger that contains an account for each charge customer. Subsidiary Ledger – a ledger that contains detailed data summarized to a controlling account. Controlling Account – An account whose balance equals the sum of all the balances in a subsidiary ledger

Sales Returns and Allowances Sales return – Merchandise returned for credit or a cash refund Damaged, defective, wrong size, etc. Sales allowance – A price reduction granted for damaged goods kept by the customer Credit Memorandum – Source document for a sales return or allowance Contra Account – An account whose balance decreases the balance of the controlling account

Posting to the Subsidiary Ledger List both accounts in the journal Use a slash Post to both accounts Controlling Account # √ mark Problem 14-2

Analyzing Cash Receipt Transactions Cash Receipt – A transaction in which money is received by the company Cash Sale – Company receives cash at the time of sale Source document will be the cash register tape (receipt) Business should total and clear register daily Tape will indicate Cash sales and sales tax collected. Also lists bankcard sales

Cash Discounts Cash Discount or Sales Discount – Amount a customer can deduct from the amount owed if purchase is made within a certain time 2/10, n/30: Customer can take a 2% discount if paid within 10 days; otherwise payment is due w/in 30 days Sales Discounts is a contra revenue account Problem 14-3 & 14-4 Problem 14-6, Post first transaction together