ACCOUNTING FOR SALES AND CASH RECEIPTS CHAPTER ELEVEN ACCOUNTING FOR SALES AND CASH RECEIPTS

MERCHANDISING BUSINESS Purchases merchandise from vendors/suppliers and sells that merchandise to customers Revenue is now from Sales. Rather than the performance of services

MERCHANDISING BUSINESSES Retailer Sells to final consumers Evidenced by: Cash Register tape Sales Ticket One copy given to the customer and the other to the Accounting Department

MERCHANDISING BUSINESSES Wholesaler Purchases merchandise from manufacturer Sells to retailers Usually “on account” Sales Invoice generated for each sale One to customer One to the Accounting Department One shipped with merchandise

CREDIT MEMORANDUM Issued by seller indicating the customer’s Accounts Receivable account has been credited for the amount of a: Return - Merchandise returned for a refund Allowance - Customer is granted a price reduction because of defect or other problems with the merchandise. One copy of memo to the customer One copy sent to Accounting Department

MERCHANDISE REVENUE ACCOUNTS SALES SALES TAX PAYABLE SALES RETURNS & ALLOWANCES SALES DISCOUNTS

The account is credited for the selling price of merchandise sold. SALES ACCOUNT REVENUE account used to record sales of merchandise. Similar to the Fees account used by a service business SALES DR. CR. + The account is credited for the selling price of merchandise sold.

GENERAL JOURNAL Example: Made $100 cash sale Cash Sales DATE DESCRIPTION DEBIT PR CREDIT 1 Cash 100 00 2 Sales 100 00 3 Made cash sale 4 5 Example: Made $100 cash sale 6 7 8 9 10 11

GENERAL JOURNAL What if this sale had been made on account? Cash Sales DATE DESCRIPTION DEBIT PR CREDIT 1 Cash 100 00 2 Sales 100 00 3 Made cash sale 4 5 6 What if this sale had been made on account? 7 8 9 10 11

account instead of Cash. GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT Accts. Rec./Customer 1 100 00 2 3 4 5 We would debit the Accounts Receivable account instead of Cash. 6 7 8 9 10 11

Customer’s name is entered after Accounts Receivable GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT Accts. Rec./Customer 1 100 00 2 3 4 5 Customer’s name is entered after Accounts Receivable in the journal. 6 7 8 9 10 11

GENERAL JOURNAL The Sales account is credited DATE DESCRIPTION DEBIT PR CREDIT Accts. Rec./Customer 1 100 00 2 Sales 100 00 3 Made credit sale 4 The Sales account is credited because a sale has been made (even though the business has not yet been paid for the merchandise). 5 6 7 8 9 10 11

The account is credited for the amount of tax imposed on the sales. SALES TAX PAYABLE LIABILITY account used to record the taxes imposed on sales and owed to the taxing authority. SALES TAX PAYABLE DR. CR. + The account is credited for the amount of tax imposed on the sales.

SALES TAX PAYABLE + SALES TAX PAYABLE LIABILITY account used to record the taxes imposed on sales and owed to the taxing authority. SALES TAX PAYABLE DR. CR. + The account is debited when the tax is paid to the proper taxing authority.

GENERAL JOURNAL Example: A cash sale for $100 plus 5% sales tax. DATE DESCRIPTION DEBIT PR CREDIT 1 2 3 4 Example: A cash sale for $100 plus 5% sales tax. 5 6 7 8 9 10 11

Therefore, cash received ($100 selling price + $5 tax) GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT Cash 105 00 1 2 3 Sales Tax would be $5 ($100 x 5%) Therefore, cash received would be $105. ($100 selling price + $5 tax) 4 5 6 7 8 9 10 11

GENERAL JOURNAL Sales is credited for the selling price, DATE DESCRIPTION DEBIT PR CREDIT Cash 105 00 1 2 Sales 100 00 3 Sales is credited for the selling price, not the amount of cash received. 4 5 6 7 8 9 10 11

GENERAL JOURNAL $5 sales tax is credited to Sales Tax Payable. Cash DATE DESCRIPTION DEBIT PR CREDIT Cash 105 00 1 2 Sales 100 00 3 Sales Tax Payable 5 00 4 Made cash sale 5 $5 sales tax is credited to Sales Tax Payable. 6 7 8 9 10 11

SALES RETURNS & ALLOWANCES CONTRA-REVENUE account used to record sales returns and sales allowances. Shown as a deduction from Sales on the Income Statement SALES RETURNS & ALLOWANCES DR. CR. + The account is debited when customer returns merchandise or an allowance is granted.

GENERAL JOURNAL Example: Credit customer, Susan Chang, DATE DESCRIPTION DEBIT PR CREDIT 1 2 3 4 Example: Credit customer, Susan Chang, returns printer cartridges (selling price $40 plus $2 sales tax). 5 6 7 8 9 10 11

Sales Returns & Allowances is debited for the selling price. GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT Sales Returns &Allowances 40 00 1 2 3 Sales Returns & Allowances is debited for the selling price. 4 5 6 7 8 9 10 11

GENERAL JOURNAL Sales Tax Payable is debited for the tax of $2. DATE DESCRIPTION DEBIT PR CREDIT Sales Returns &Allowances 40 00 1 2 Sales Tax Payable 2 00 3 Sales Tax Payable is debited for the tax of $2. 4 5 6 7 8 9 10 11

Accounts Receivable is GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT Sales Returns &Allowances 40 00 1 2 Sales Tax Payable 2 00 3 Accts. Receivable/Chang 42 00 4 Issued credit memo for 5 returned merchandise 6 7 Accounts Receivable is credited for $42. 8 9 10 11

SALES DISCOUNTS + SALES DISCOUNTS CONTRA-REVENUE account used to record discounts given to customers who buy merchandise on account to encourage prompt payment. SALES DISCOUNTS DR. CR. + The account is debited for the amount of the Cash Discount at the time of payment.

CREDIT TERMS 2/10, n/30 2% discount off sales price

CREDIT TERMS 2/10, n/30 If paid within 10 days

CREDIT TERMS 2/10, n/30 Or the total amount is due

CREDIT TERMS 2/10, n/30 In 30 days

Total amount due in 30 days. CREDIT TERMS 1/10, n/30 1% off if paid in 10 days or Total amount due in 30 days.

Total amount due in 60 days. CREDIT TERMS 2/eom, n/60 2% off if paid before the end of the month or Total amount due in 60 days.

3% off if paid within 10 days Total amount due in 60 days. CREDIT TERMS 3/10 eom, n/60 3% off if paid within 10 days after the end of month or Total amount due in 60 days.

GENERAL JOURNAL Example: Merchandise was sold for $100 DATE DESCRIPTION DEBIT PR CREDIT 1 2 3 Example: Merchandise was sold for $100 with credit terms of 2/10, n/30, and cash is received within the discount period. 4 5 6 7 8 9 10 11

GENERAL JOURNAL $100 sale x 2% discount Cash 98 00 Sales Discounts DATE DESCRIPTION DEBIT PR CREDIT Cash 98 00 1 2 Sales Discounts 2 00 3 4 5 $100 sale x 2% discount 6 7 8 9 10 11

GENERAL JOURNAL Cash 98 00 Sales Discounts 2 00 DATE DESCRIPTION DEBIT PR CREDIT Cash 98 00 1 2 Sales Discounts 2 00 3 Accts. Receivable/Cust. 100 00 4 Received cash on account 5 6 7 8 9 10 11

Sales Returns & Allowances and Sales Discounts are deducted from Sales Income Statement Sales $38,500 Less: Sales returns and allowances $200 Sales discounts 140 340 Sales Returns & Allowances and Sales Discounts are deducted from Sales in the Revenue section of the Income Statement.

Income Statement Sales $38,500 Less: Sales returns and allowances $200 Sales discounts 140 340 Net Sales $38,160

SALES TRANSACTIONS Let’s review the General Journal entries for these transactions. April 4 Made sale no. 133C on account to Enrico Lorenzo, $1,520 plus $76 sales tax April 10 Made sale no. 134C on account to Brenda Myers, $40 plus $22 sales tax April 18 Made sale no. 105D on account to Edith Walton, $980 plus $49 sales tax April 21 Made sale no. 202B on account to Susan Chang, $620 plus $31 sales tax April 24 Made sale no. 162A on account to Heidi Schwitzer, $1,600 plus $80 sales tax

4 lines are used to prepare GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 1 Apr. 4 Accts. Receivable/E. Lorenzo 1,596 00 2 Sales 1,520 00 3 Sales Tax Payable 76 00 4 sale no. 133C 5 4 lines are used to prepare one journal entry!! 6 7 8 9 10 11

GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 1 Apr. 4 Accts. Receivable/E. Lorenzo 1,596 00 2 Sales 1,520 00 3 Sales Tax Payable 76 00 4 sale no. 133C 5 6 10 Accts. Receivable/B. Myers 462 00 7 Sales 440 00 8 Sales Tax Payable 22 00 9 sale no. 134C 10 11

GENERAL JOURNAL continued DATE DESCRIPTION DEBIT PR CREDIT 12 18 Accts. Receivable/E. Walton 1,029 00 13 Sales 980 00 14 Sales Tax Payable 49 00 15 sale no. 105D 16 17 21 Accts. Receivable/S. Chang 651 00 18 Sales 620 00 19 Sales Tax Payable 31 00 20 sale no. 202B 21 22

GENERAL JOURNAL continued DATE DESCRIPTION DEBIT PR CREDIT 23 24 Accts. Receivable/H. Schwitzer 1,680 00 24 All the entries involved the same accounts!! Sales 1,600 00 25 Sales Tax Payable 80 00 26 sale no. 162A 27 28 29 30 31 32 33

SALES JOURNAL A column for each account involved in “Sales on account” transactions: Accounts Receivable (Debit), Sales (Credit), Sales Tax Payable (Credit) Four steps for entering a transaction: Step #1 Enter Date. Step #2 Enter Sales number. Step #3 Enter Customer. Step #4 Enter Dollar amount.

The whole transaction is Account names are not entered. SALES JOURNAL Page 6 Date Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 3 The whole transaction is recorded on ONE line. Account names are not entered. 4 5 6 7 8 9 10 11

Now let’s look at posting SALES JOURNAL Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 7 Now let’s look at posting from the Sales Journal. 8 9 10 11

Step #1a Total the amount columns. SALES JOURNAL Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 Step #1a Total the amount columns. 8 9 10 11

SALES JOURNAL Step #1b Verify that the total Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 Step #1b Verify that the total of the debit column equals the total of the credit columns. 8 9 10 11

SALES JOURNAL Debits $5,418 Credits $5,418 Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 8 Debits $5,418 Credits $5,418 9 10 11

Step #1c Rule the columns. SALES JOURNAL Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 8 Step #1c Rule the columns. 9 10 11

Let’s post the Accounts Receivable total. SALES JOURNAL Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 8 Let’s post the Accounts Receivable total. 9 10 11

FOUR-COLUMN ACCOUNT 122 ACCOUNTS RECEIVABLE Step #2 Enter the date. Account No. BALANCE DATE ITEM PR DR. CR. DR. CR. 20-- Apr. 1 Balance 12,000 30 Step #2 Enter the date.

FOUR-COLUMN ACCOUNT 122 ACCOUNTS RECEIVABLE Step #3 Enter the amount. Account No. BALANCE DATE ITEM PR DR. CR. DR. CR. 20-- Apr. 1 Balance 12,000 30 5,418 Step #3 Enter the amount.

Step #4 Enter the new balance. FOUR-COLUMN ACCOUNT 122 ACCOUNTS RECEIVABLE Account: Account No. BALANCE DATE ITEM PR DR. CR. DR. CR. 20-- Apr. 1 Balance 12,000 30 5,418 17,418 Step #4 Enter the new balance.

Step #5 Enter “S” for Sales Journal and the journal page number. FOUR-COLUMN ACCOUNT 122 ACCOUNTS RECEIVABLE Account: Account No. BALANCE DATE ITEM PR DR. CR. DR. CR. 20-- Apr. 1 Balance 12,000 30 S6 5,418 17,418 Step #5 Enter “S” for Sales Journal and the journal page number.

Step #6 Enter the account number below the column total. SALES JOURNAL Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 (122) 8 Step #6 Enter the account number below the column total. 9 10 11

SALES JOURNAL Steps #2 - #6 will be repeated for the Page 6 Date Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 (122) (401) (231) 8 Steps #2 - #6 will be repeated for the Sales and Sales Tax Payable columns. 9 10 11

SALES JOURNAL A company that does not charge Page 1 Date Sale No. To Whom Sold PR Accts. Receivable Debit/Sales Credit 1 2 3 4 A company that does not charge sales tax, such as a wholesaler, will use a single column Sales Journal. 5 6 7 8 9 10 11

SALES JOURNAL Each transaction must also be posted Page 6 Date Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit 20-- 1 Apr 4 133C Enrico Lorenzo 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 (122) (401) (231) 8 Each transaction must also be posted to the Accounts Receivable ledger. 9 10 11

ACCOUNTS RECEIVABLE LEDGER A separate “subsidiary” ledger Individual accounts receivable accounts for each customer Often numbered Filed either alphabetically or numerically Accounts Receivable account in the general ledger is the “controlling account.”

ACCOUNTS RECEIVABLE LEDGER Name: Enrico Lorenzo Address: 5240 Tousley Court, Indianapolis, IN 46224-5678 BALANCE DATE ITEM PR DEBIT CREDIT 20-- Apr. 4 S6 1,596 1,596 Step #1 Enter the date. Step #2 Enter the amount. Step #3 Update the balance. Step #4 Enter “S” (Sales Journal) and “6” (page number) in the PR column.

SALES JOURNAL A check mark is entered to indicate the Page 6 Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit Date 20-- 1 Apr 4 133C Enrico Lorenzo ( / ) 1,596 1,520 76 2 10 134C Brenda Myers 462 440 22 3 18 105D Edith Walton 1,029 980 49 4 21 202B Susan Chang 651 620 31 5 24 162A Heidi Schwitzer 1,680 1,600 80 6 5,418 5,160 258 7 (122) (401) (231) 8 A check mark is entered to indicate the transaction has been posted to the Accounts Receivable ledger. 9 10 11

The other sales are posted to the Accounts Receivable ledger SALES JOURNAL Page 6 Date Sale No. To Whom Sold PR Accts. Rec. Debit Sales Credit Sales Tax Pay. Credit 20-- 1 Apr 4 133C Enrico Lorenzo ( / ) 1,596 1,520 76 2 10 134C Brenda Myers ( / ) 462 440 22 3 18 105D Edith Walton ( / ) 1,029 980 49 4 21 202B Susan Chang ( / ) 651 620 31 5 24 162A Heidi Schwitzer ( / ) 1,680 1,600 80 6 5,418 5,160 258 7 (122) (401) (231) 8 The other sales are posted to the Accounts Receivable ledger in the same manner. 9 10 11

Now let’s look at the posting for a Sales Return entry. GENERAL JOURNAL DATE DESCRIPTION PR DEBIT CREDIT Sales Returns &Allow. 40 00 1 May 5 2 Sales Tax Payable 2 00 3 Accts. Rec./S. Chang 42 00 4 Returned Merchandise - 5 Credit Memo #72 6 Now let’s look at the posting for a Sales Return entry. 7 8 9 10 11

GENERAL JOURNAL Sales Returns and Allowances DATE DESCRIPTION PR DEBIT CREDIT May 5 Sales Returns &Allow. 40 00 1 401.1 2 Sales Tax Payable 2 00 3 Accts. Rec./S. Chang 42 00 4 Returned Merchandise - 5 Credit Memo #72 6 Sales Returns and Allowances is posted in the normal manner. Its account number is recorded in the PR column. 7 8 9 10 11

GENERAL JOURNAL Sales Tax Payable is also posted in the normal manner. DATE DESCRIPTION PR DEBIT CREDIT 1 May 5 Sales Returns &Allow. 40 00 401.1 2 Sales Tax Payable 2 00 231 3 Accts. Rec./S. Chang 42 00 4 Returned Merchandise - 5 Credit Memo #72 6 Sales Tax Payable is also posted in the normal manner. Its account number is recorded in the PR column. 7 8 9 10 11

GENERAL JOURNAL The $42 credit is posted to the DATE DESCRIPTION PR DEBIT CREDIT May 5 Sales Returns &Allow. 40 00 1 401.1 2 Sales Tax Payable 2 00 231 3 Accts. Rec./S. Chang 122 42 00 ( / ) 4 Returned Merchandise - 5 Credit Memo #72 6 The $42 credit is posted to the Accounts Receivable controlling account and to the Subsidiary ledger account for S. Chang. 7 8 9 10 11

BANK CREDIT CARD SALES Similar to cash sales because cash is available to the business as soon as an electronic deposit is made at the end of the day Business receives amount of sale. Less a processing fee

Made a bank credit card sale The seller will receive cash of $100.80. GENERAL JOURNAL DATE DESCRIPTION PR DEBIT CREDIT May 6 Cash 100 80 1 2 3 4 Made a bank credit card sale of $100 (plus $5 tax). The seller will receive cash of $100.80. ($105 - 4% fee) 5 6 7 8 9 10 11

Bank Credit Card Expense is debited for the processing fee. GENERAL JOURNAL DATE DESCRIPTION PR DEBIT CREDIT Cash 100 80 1 May 6 2 Bank Credit Card Exp. 4 20 3 4 Bank Credit Card Expense is debited for the processing fee. 5 6 7 8 9 10 11

GENERAL JOURNAL Cash 100 80 Bank Credit Card Exp. 4 20 Sales 100 00 DATE DESCRIPTION PR DEBIT CREDIT Cash 100 80 1 May 6 2 Bank Credit Card Exp. 4 20 3 Sales 100 00 4 Sales Tax Payable 5 00 5 Made Credit Card Sale 6 7 8 9 10 11

CASH RECEIPTS JOURNAL Used to record only cash receipt transactions Includes separate columns for: Cash (Debit) Bank Credit Card Expense (Debit) Accounts Receivable (Credit) Sales (Credit) Sales Tax Payable (Credit) General (Credit)

EXAMPLE: April 14, received cash on account from Enrico Lorenzo CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 1 2 3 EXAMPLE: April 14, received cash on account from Enrico Lorenzo for sale no. 133C, $1,596. 4 5 6 7 8 9 10 11

CASH RECEIPTS JOURNAL Step #1 Enter date. Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 2 3 4 Step #1 Enter date. 5 6 7 8 9 10 11

Step #2 Enter name of account credited. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 2 3 4 Step #2 Enter name of account credited. 5 6 7 8 9 10 11

CASH RECEIPTS JOURNAL This column is used for two purposes: Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 2 3 This column is used for two purposes: 1. To identify the customer name for any collection on account. This column is used whenever the Accounts Receivable Credit column is used. 2. To enter the appropriate account name whenever the General Credit column is used. 4 5 6 7 8 9 10 11

Step #3 Enter the dollar amounts. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 3 4 Step #3 Enter the dollar amounts. 5 6 7 8 9 10 11

CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 3 4 5 6 7 8 9 10 11

Cash was also received on account on April 20th and 28th. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 4 5 Cash was also received on account on April 20th and 28th. 6 7 8 9 10 11

CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 4 5 6 7 8 9 10 11

CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 5 6 7 8 9 10 11

CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 5 6 7 8 9 10 11

Now let’s journalize cash sales for April 30th CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 5 Now let’s journalize cash sales for April 30th of $3,600 plus tax of $180. 6 7 8 9 10 11

This column is left blank for cash sales. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 This column is left blank for cash sales. 6 7 8 9 10 11

CASH RECEIPTS JOURNAL = 3,600 180 + 3,780 Total Credits = Total Debits Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 6 3,600 180 = + 3,780 7 8 Total Credits = Total Debits 9 10 11

CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 7 Bank credit card sales are similar to cash sales, no entry is made in the “Account Credited” column. 8 9 10 11

Bank Credit Card Sales of $2,500 CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 6 7 Bank Credit Card Sales of $2,500 were made this month. 8 9 10 11

Sales Tax on these sales was $125. CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 6 7 Sales Tax on these sales was $125. 8 9 10 11

The service charge on these bank credit card sales was $100. CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 6 7 The service charge on these bank credit card sales was $100. 8 9 10 11

[($2,500sales + $125tax) - $100service chg]. CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,525 6 7 The cash received was $2,525 [($2,500sales + $125tax) - $100service chg]. 8 9 10 11

CASH RECEIPTS JOURNAL Example: April 30, received cash Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 Example: April 30, received cash for rent revenue $600. 7 8 9 10 11

We need to credit Rent Revenue and debit Cash. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 7 8 We need to credit Rent Revenue and debit Cash. 9 10 11

CASH RECEIPTS JOURNAL Since there is no column for Rent Revenue, Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 600 7 8 Since there is no column for Rent Revenue, we must use the “General Credit” column. 9 10 11

CASH RECEIPTS JOURNAL When the “General Credit” column is used, Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 600 7 When the “General Credit” column is used, the “Account Credited” column must identify the specific General Ledger account affected. 8 9 10 11

CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 8 9 10 11

Borrowing money would be recorded in a similar manner. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 600 7 30 Notes Payable 3,000 8 Borrowing money would be recorded in a similar manner. 9 10 11

CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 9 10 11

CASH RECEIPTS JOURNAL On a daily basis, the amounts in the Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 600 7 30 Notes Payable 3,000 8 On a daily basis, the amounts in the “General Credit” column are posted. 9 10 11

“CR” for Cash Receipts Journal. FOUR-COLUMN ACCOUNT 412 RENT REVENUE Account: Account No. BALANCE DATE ITEM PR DR. CR. DR. CR. 20-- Apr. 1 Balance 1,800 30 CR7 600 2,400 “CR” for Cash Receipts Journal.

General Ledger account number CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 412 600 7 30 Notes Payable 3,000 8 General Ledger account number 9 10 11

Notes Payable is posted in the same manner. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 412 600 7 30 Notes Payable 201 3,000 8 Notes Payable is posted in the same manner. 9 10 11

At the end of the month, the columns are totaled. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 412 600 7 30 Notes Payable 201 3,000 8 3,600 3,087 9 At the end of the month, the columns are totaled. 10 11

CASH RECEIPTS JOURNAL Next, we verify that the debit columns Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 3,600 3,087 6,100 305 100 12,992 9 Next, we verify that the debit columns equal the total of the credit columns. 10 11

CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 3,600 3,087 6,100 305 100 12,992 9 $3,600 + $3,087 + $6,100 + $305 = $13,092 Credits 10 11

CASH RECEIPTS JOURNAL $100 + $12,992 = $13,092 Debits Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 3,600 3,087 6,100 305 100 12,992 9 $100 + $12,992 = $13,092 Debits DEBITS = CREDITS!!! 10 11

Each column total (except General) is posted at the end of the month. CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 3,600 3,087 6,100 305 100 12,992 9 Each column total (except General) is posted at the end of the month. 10 11

“CR” for Cash Receipts Journal FOUR-COLUMN ACCOUNT 122 ACCOUNTS RECEIVABLE Account: Account No. BALANCE DATE ITEM PR DR. CR. DR. CR. 20-- Apr. 1 Balance 12,000 30 S6 5,418 17,418 30 CR7 3,087 14,331 “CR” for Cash Receipts Journal

Account Number indicates CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 3,600 3,087 6,100 305 100 12,992 9 (122) Account Number indicates total was posted. 10 11

Remaining columns are posted in the same manner. CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 3,600 3,087 6,100 305 100 12,992 9 (122) (401) (231) (513) (101) 10 Remaining columns are posted in the same manner. 11

Check mark indicates the column total is not posted. CASH RECEIPTS JOURNAL Page 7 General Credit Accts. Rec. Credit Sales Credit Sales Tax Pay. Credit Bank C C Exp. Debit Cash Debit 1 1,596 1,596 2 462 462 3 1,029 1,029 4 3,600 180 3,780 5 2,500 125 100 2,500 6 600 600 7 3,000 3,000 8 3,600 3,087 6,100 305 100 12,992 9 ( /) (122) (401) (231) (513) (101) 10 Check mark indicates the column total is not posted. 11

Postings to the subsidiary Accounts Receivable ledger are made daily. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 412 600 7 30 Notes Payable 201 3,000 8 3,600 3,087 9 Postings to the subsidiary Accounts Receivable ledger are made daily. 10 11

ACCOUNTS RECEIVABLE LEDGER Name: Enrico Lorenzo Address: 5240 Tousley Court, Indianapolis, IN 46224-5678 BALANCE DATE ITEM PR DEBIT CREDIT 20-- Apr. 4 S6 1,596 1,596 14 CR7 1,596

CASH RECEIPTS JOURNAL Check mark indicates transaction was posted to Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 ( /) Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers 462 3 28 Edith Walton 1,029 4 30 5 30 6 30 Rent Revenue 412 600 7 30 Notes Payable 201 3,000 8 3,600 3,087 9 Check mark indicates transaction was posted to the Accounts Receivable subsidiary ledger. 10 11

The payments by Brenda and Edith are posted in the same manner. CASH RECEIPTS JOURNAL Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 ( /) Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers ( /) 462 3 28 Edith Walton ( /) 1,029 4 30 5 30 6 30 Rent Revenue 412 600 7 30 Notes Payable 201 3,000 8 3,600 3,087 9 The payments by Brenda and Edith are posted in the same manner. 10 11

CASH RECEIPTS JOURNAL Check mark is entered into the PR column Page 7 Date Account Credited PR General Credit Accts. Rec. Credit 20-- 1 ( /) Apr 14 Enrico Lorenzo 1,596 2 20 Brenda Myers ( /) 462 3 28 Edith Walton ( /) 1,029 4 30 ( /) 5 30 ( /) 6 30 Rent Revenue 412 600 7 30 Notes Payable 201 3,000 8 3,600 3,087 9 Check mark is entered into the PR column for cash sales and bank credit card sales. 10 11

SCHEDULE OF ACCOUNTS RECEIVABLE Prepared to verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance Listing of customers and their balances Usually prepared at the end of the month Total of the balances listed is compared with the balance in the Accounts Receivable account.

Northern Micro Schedule of Accounts Receivable April 30, 20-- Helen Avery $2,302 Susan Chang 651 Heidi Schwitzer 3,563 Ken Ulmet 3,315 Vivian Winston 4,500 $14,331 This should be the balance in the Accounts Receivable controlling account.

ERRORS If the Schedule of Accounts Receivable total and the Accounts Receivable balance do not agree: Step 1 Verify the total of the schedule. Step 2 Verify the postings to the accounts receivable ledger. Step 3 Verify the postings to the Accounts Receivable in the general ledger.