Accounting 3 Chapter 19 Section 2

Cash Receipts Journal This is a special journal used to record only cash receipt transactions. This is a special journal used to record only cash receipt transactions. It is the special journal with the most amount columns including: General debit and credit, Accounts Receivable credit, Sales credit, Sales Tax Payable debit and credit, Sales Discount debit and Cash debit. It is the special journal with the most amount columns including: General debit and credit, Accounts Receivable credit, Sales credit, Sales Tax Payable debit and credit, Sales Discount debit and Cash debit. Example on next slide. Example on next slide.

Cash Receipts Journal Example Cash Receipts Journal Page ___ Date Account Title Post Ref. GENERAL DEBITCREDIT Accts Rec. Credit Sales Credit Cash Debit Doc No. Sales Tax Payable Debit Credit Sales Dis. Debit

Journalizing Cash and Credit Card Sales This type of transaction is done exactly the same as we have previously learned in the expanded journals, using the Sales credit, Sales Tax Payable credit, and Cash debit columns. This type of transaction is done exactly the same as we have previously learned in the expanded journals, using the Sales credit, Sales Tax Payable credit, and Cash debit columns. Example Transaction and visual steps on next slide. Example Transaction and visual steps on next slide.

March 1. Recorded cash and credit card sales, $2,480.00, plus sales tax, $198.40; total, $2, Cash Register Tape No. 1. Cash Receipts Journal Page ___ Date Account Title Post Ref. GENERAL DEBITCREDIT Accts Rec. Credit Sales Credit Cash Debit Doc No. Sales Tax Payable Debit Credit Sales Dis. Debit 7 Mar1T

Calculating Cash Receipts on Account with Sales Discount To encourage early payment for a sale on account, a deduction on the invoice amount may be allowed. As we have learned on the buyer side, this is called a cash discount. To encourage early payment for a sale on account, a deduction on the invoice amount may be allowed. As we have learned on the buyer side, this is called a cash discount. A cash discount on the seller side is called a sales discount. A cash discount on the seller side is called a sales discount. At the time of sale, the seller does not know if the customer will pay within the discount period or not, so a full invoice is written. At the time of sale, the seller does not know if the customer will pay within the discount period or not, so a full invoice is written.

Calculating Cash Receipts on Account with Sales Discount If the customer does pay within the discount period, then the sales discount is figured. If the customer does pay within the discount period, then the sales discount is figured. Three Steps: Three Steps: Sales Invoice Amount x Sales Discount Rate =Sales Discount Sales Invoice Amount x Sales Discount Rate =Sales Discount Sales Discount x Sales Tax Rate = Sales Tax Reduction Sales Discount x Sales Tax Rate = Sales Tax Reduction Total Invoice Amount – Sales Discount – Sales Tax Reduction = Cash Received Total Invoice Amount – Sales Discount – Sales Tax Reduction = Cash Received

Calculating Cash Receipts on Account with Sales Discount Example Transaction: Example Transaction: March 2. Sold merchandise on account to Tennis Castle, $1, plus 8% sales tax, $144.00, total invoice amount, $1, Sale Terms 1/10, n/30. March 2. Sold merchandise on account to Tennis Castle, $1, plus 8% sales tax, $144.00, total invoice amount, $1, Sale Terms 1/10, n/30. March 11, Received payment for this transaction within discount period. March 11, Received payment for this transaction within discount period. Formula: (Refer to previous slide for abbreviation meanings if needed) Formula: (Refer to previous slide for abbreviation meanings if needed) (SIA) $ x (SDR) 1% = (SD) $18.00 (SIA) $ x (SDR) 1% = (SD) $18.00 (SD) $18.00 x (STR) 8% = (STR) $1.44 (SD) $18.00 x (STR) 8% = (STR) $1.44 (TIA) $ – (SD) $18.00 – (STR) $1.44 = (CR) $ (TIA) $ – (SD) $18.00 – (STR) $1.44 = (CR) $ Full transaction and visual steps on next slide. Full transaction and visual steps on next slide.

March 11. Received cash on account from Tennis Castle, $1,924.56, covering Sales Invoice No. 176 for $1, ($1, $144.00), less 1% discount, $18.00, and less sales tax, $1.44. Receipt No Cash Receipts Journal Page ___ Date Account Title Post Ref. GENERAL DEBITCREDIT Accts Rec. Credit Sales Credit Cash Debit Doc No. Sales Tax Payable Debit Credit Sales Dis. Debit 8 Mar11 Tennis Castle R Although a discount is given, the company should get full credit for the original invoice amount. This is why the total invoice amount is credited to accounts receivable. Because a discount is given, the seller no longer is required to pay this amount of sales tax to the government. This is why the sales tax deduction is entered into sales tax payable debit. The sales discount account is used to keep track of all the sales discounts given by the seller in a fiscal period. It has a normal debit balance. As we have learned before, cash debit is for the actual amount of cash received from the customer.

Posting from a Cash Receipts Journal to an Accounts Receivable Ledger. Each entry in the Accounts Receivable Credit column affects the account of the customer named in the Account Title column. Each entry in the Accounts Receivable Credit column affects the account of the customer named in the Account Title column. So, each amount in this column should be posted individually to the proper customer account in the Accounts Receivable Ledger. So, each amount in this column should be posted individually to the proper customer account in the Accounts Receivable Ledger. CR and the page number is used for the posting reference from this journal. CR and the page number is used for the posting reference from this journal. An example will be done in the Work Together problem. An example will be done in the Work Together problem.

Posting Totals of the Special Amount Columns to the General Ledger. At the end of the fiscal period, the cash receipts journal is ruled and proved. At the end of the fiscal period, the cash receipts journal is ruled and proved. At that time the totals of the special amount columns should be posted to their respective accounts in the General Ledger. At that time the totals of the special amount columns should be posted to their respective accounts in the General Ledger. An example will be done in the work together problem. An example will be done in the work together problem.

Work Together p. 498 Cash Receipts Journal Page ___ Date Account Title Post Ref. GENERAL DEBITCREDIT Accts Rec. Credit Sales Credit Cash Debit Doc No. Sales Tax Payable Debit Credit Sales Dis. Debit 5 May3T Nelson Co.R Hawbecker SupplyR Totals (1125)(4105)(2140) 4110)(1105) Assignmen t

CustomerCust No. DateItem Post Ref DebitCredit Debit Balance CustomerCust No. DateItem Post Ref DebitCredit Debit Balance Accounts Receivable Ledger Hawbecker Supply 140 Nelson Company 160 May 1 Balance CR May 1 Balance CR

Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT General Ledger Cash 1105 May 1 Balance CR Accounts Receivable1125 May 1 Balance CR

Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT General Ledger Sales Tax Payable 2140 May 1 Balance CR CR Sales 4105 May 1 Balance CR

Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT General Ledger Sales Discount 4110 May 1 Balance CR

Assignment Do Application 19-2 by hand. Do Application 19-2 by hand. Turn it into Mrs. Middleton. Turn it into Mrs. Middleton. Move on to Section 3. Move on to Section 3.