© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Sales and Cash Receipts Chapter 9

Learning Objective 1 Recording and posting sales transactions © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-1

Retailers Buy products such as toys, apparel, games, bikes, and other items from manufacturers and wholesalers Resell the goods to customers © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-1

Gross Sales Total of cash and charge sales If cash sales were $1,000 and charge sales were $2,000, credit the Sales account $3,000 © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Sales (Gross) Dr.Cr. 3,000 Cash Dr.Cr. 1,000 Accounts Receivable Dr.Cr. 2,000 LO-1

Sales Amount earned from sale of merchandise inventory Revenue account Credit balance Reported on income statement © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-1

Record the sale © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Sales Invoice LO-1

© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Accounts Receivable 1,240 Sales 1,240 Sales LO-1

Sales Returns and Allowances Contra-revenue account Reported on income statement Given when a customer returns a product or is given a price reduction If charge customer Smith returns a product valued at $50 on June 10 th, the following would occur © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Sales Returns & Allowances Dr.Cr. 50 Accounts Receivable (Smith) Dr.Cr. 50 LO-1

Sales Returns and Allowances © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater General Journal Page 1 DateAccount Titles and DescriptionPRDr.Cr. Issued credit memorandum Jun10 Sales Returns and Allowances50 Accounts Receivable, Smith50 LO-1

Sales Discounts Contra-revenue account Given to customers who pay early 2/10, n/30 - 2% discount given to customers who pay within first 10 days, full amount due in 30 days n/10, EOM- no discount is given, full amount of bill is due within 10 days after the end of the month Reported on income statement © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-1

Sales Discounts Assume that Jerome Walther pays Terrance Home Improvement Store within 10 days with terms of 2/10, n/30. Sale was in the amount of $936. Prepare the journal entry. © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-1

Sales Discounts © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Sales discount = $936 X.02 LO-1

Sales Discounts Discount period - time when a discount is granted (less than credit period) Credit period - length of time allowed to pay back the bill If customer Smith has a $100 invoice with terms of 2/10, n/30, he would be allowed a $2 discount (100 *.02) © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Sales Discount Dr.Cr. 2 LO-1

Sales Discounts © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater General Journal Page 1 DateAccount Titles and DescriptionPRDr.Cr. Jun30Cash98 Sales Discount 2 Accounts Receivable, Smith 100 Payment from sale on account LO-1

Sales Tax Payable Liability account Stores must collect tax from customers and send it to the state Recorded in Sales Tax Payable account © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-1

Sales Tax Payable Assume a $1,000 cash sale was made along with a $2,000 credit sale at a 6% tax rate ◦ $1,000 *.06 = $60 ($1,000 + $60= $1,060) Cash ◦ $2,000 *.06 = $120 ($2,000 + $120 =$2,120) Accounts Receivable © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Cash Dr.Cr. 1,060 Accounts Receivable Dr.Cr. 2,120 Sales Tax Payable Dr.Cr. 180 Sales Dr.Cr. 3,000 LO-1

Sales Tax Payable © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Sales tax = $1,240 x 5% = $62.00 LO-1

Sales Tax Payable © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-1

Learning Objective 2 Preparing, journalizing, and posting a credit memorandum © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-2

Credit Memorandum Paper sent by the seller to a customer who has returned merchandise Indicates to the customer that the seller is reducing the amount owed by the customer © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-2

Credit Memorandum © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Record the Return LO-2

Sales Returns and Allowances © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-2

Sales Returns & Allowances © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Accounts Receivable 1,240 Sales 1,240 Sales Returns & Allowances 304 Bal. 936 LO-2

Sales Returns & Allowances © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Cash Sales 1,240 Sales Returns & Allowances 304 Bal Sales Discounts LO-2

Compute Net Sales Sales$1, Less Sales Discounts18.72 Sales Returns & Allowances Net Sales$ © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-2

Learning Objective 3 Recording and posting cash receipts transactions © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-3

Cash Receipts Transactions © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Are recorded in general journal and then posted to general ledger Charge customer transactions are recorded in the accounts receivable ledger LO-3

Sample Cash Receipts Transactions © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-3

Sample Cash Receipts Transactions Partial General Ledger © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Cash 111 Dr.Cr. 6/1 GJ 1 5,000 T. Samolis, Capital 311 Dr.Cr. Sales 411 Dr.Cr. Sales Discount 413 Dr.Cr. 6/3 GJ /1GJ 1 5,000 6/3 GJ /3 GJ 1 1,000 6/5 GJ 1 2,000 5,000 7, ,000 Accounts Receivable 113 Dr.Cr. 6/3 GJ 1 1,000 1,000 LO-3

Learning Objective 4 Recording to the accounts receivable subsidiary ledger © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-4

Subsidiary Ledger Subsidiary Ledger Ledger that contains accounts of a single type Open an account for each customer Often used for credit customers Arranged alphabetically © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-4

Accounts Receivable © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Accounts Receivable 1,240 Q. Adams 3,500 B. Merideth 800 1,240 Bal. 4,300 J. Walther Controlling AccountSubsidiary Accounts 3, ,240 Bal. 4,300 LO-4

Learning Objective 5 Preparing a schedule of accounts receivable © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-5

Schedule of Accounts Receivable Terrance Home Improvement Store Schedule of Accounts Receivable October 31, 20xx Q. Adams$3,500 B. Merideth800 Total Accounts Receivable$4,300 © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO-5

Put it all together We’ll use Problem 9B-3 to put these concepts together © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater LO- 1,2,3,4,5

© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Problem 9B-3 LO- 1,2,3,4,5 Page 1

© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Problem 9B-3 LO- 1,2,3,4,5 Page 2

© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Problem 9B-3 LO- 1,2,3,4,5 Page 3

© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Problem 9B-3 LO- 1,2,3,4,5 Page 4

© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Problem 9B-3 LO- 1,2,3,4,5 Page5

Accounts Receivable Subsidiary Ledger (Problem 9B-3) © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater B. Dale Bal.400 2,000 R. Lester Bal Bal ,000 P. Pry 500 Bal J. Zon 2, ,500 6, Bal. 400 Bal. 6,000 Bal. 600 Bal. 1,000 LO- 1,2,3,4,5 (Beginning Account balances provided)

Schedule of Accounts Receivable (Problem 9B-3) © 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater Peaker’s Sneaker Shop Schedule of Accounts Receivable May 31, 20XX B. Dale$400 R. Lester6,000 P. Pry600 J. Zon1,000 Total Accounts Receivable$8,000 LO- 1,2,3,4,5

© 2010 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 11e by Slater End of Chapter 9