© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. RECEIPTS AND CASH PAYMENTS Chapter 10

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The ______________ is the _____ the _____ allows the _____ before _____ payment has to be made. A ______________ is an amount that a customer can _____ if a bill is paid within a __________ _____. The discount is based on the total amount of the _____ after ____________________ and _____ _____ on the invoice have been deducted. Credit Terms

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Credit Terms The seller offers a 1 percent discount if the bill is paid within 15 days after the invoice date, and the whole bill must be paid within 60 days after the last day of the month. 1/15/, n/60 1/15 /, n/60 It is said “One, Fifteen Net 60” The seller offers a 2 percent discount if the bill is paid within 10 days, and the whole bill must be paid within 60 days after the last day of the month. 2/10/, EOM, n/60 2 /10, n/60 It is said “Two, Ten EOM, Net 60” /, EOM after the end of the month

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise 1

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (a) Transaction (a) – On August 10, Whitewater Raft Supply sold merchandise on account to Mesa River Raft Company, invoice no. 9384, $ ; terms 2/10, n/30. Sales Discounts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (b) Transaction (b) – On August 10, received check from Mesa River Raft Company for $1, in payment of invoice no. 9384, less discount of $ Sales Discounts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (a) Transaction (a) – On September 1, Whitewater Raft Supply sold merchandise on account to Rugged River Company, $3,614, invoice no. 9391, terms 2/10, n/30. Sales Returns

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (b) Transaction (b) – On September 5, Rugged River Company returned $254 worth of the merchandise. Whitewater Raft Supply issued credit memorandum no and recorded the transaction. Sales Returns

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (c) Transaction (c) – On September 8, received a check from Rugged River Company for $3, in payment of invoice no. 9391, less return and cash discount. Sales Returns

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (a) Transaction (a) – On April 1, Blue Merchandise Company sold merchandise on account to Yellow Company, invoice no. 1294, $9,540, terms 2/10, n/30, and recorded the sale in the general journal. No Sales Discount Involved

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (b) Transaction (b) – On April 26, received check from Yellow Company for $9,450 in payment of invoice no No Sales Discount Involved The discount was not applied to the invoice amount because ____________________ __________________________________.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise 2

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The _____________________ account, like Purchases Returns and Allowances, is a ______ ______. The Purchase Discounts account is treated as a __________ from _____________________ on the _____________ income statement. Purchase Discounts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (a) Transaction (a) – On August 2, Whitewater Raft Supply bought merchandise on account from Pataponia, Inc., invoice no. 2706, $1,710; terms 2/10, n/30; dated July 31; FOB San Francisco, freight prepaid and added to the invoice, $ Purchase Discounts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (b) Transaction (b) – On August 8, issued Ck. No to Pataponia, Inc., in payment of invoice no. 2706, less cash discount of $34.20, $1, Purchase Discounts $1, $1, $

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Purchase Discounts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (a) Transaction (a) – On November 1, Blue Merchandise Company bought merchandise on account from Grey, Inc., invoice no. 3901, $4,600; terms 2/10, n/30, dated October 31. No Purchase Discounts Involved

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. (b) Transaction (b) – On November 28, issued Ck. No to Grey, Inc., in payment of invoice no. 3901, $4,600. No Purchase Discounts Involved

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise 3

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Manufacturers and wholesalers publish catalogs listing their products at _________ prices. These organizations offer their customers substantial reductions, called _______________, from the ______ prices. Trade discounts are ______________ because they are _______________ to ______ payments. Manufacturers and wholesalers use trade discounts to ______ the high cost of ________________ when selling prices change. Trade Discounts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Firms may quote trade discounts as a single percentage For example, a distributor of furnaces grants a single discount off the listed catalog price of $8,000. The actual selling price is $4,800, calculated as follows: Trade Discounts Neither the seller nor the buyer records trade discounts in the accounts; they enter only the selling price.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Firms may also quote trade discounts as a chain, or series, of percentages. For example, a distributor of automobile parts grants discounts of 30 percent, 10 percent, and 10 percent off the listed catalog price of $900. Trade Discounts as a Chain of Percentages

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Cash discounts could also apply in situations involving trade discounts. For example, using the preceding sale, it also includes a cash discount of 2/10; n/30. Cash Discounts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Practice Exercise 4

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A ____________________ contains all transactions in which ______ is received, or ______. When a cash receipts journal is used, all transactions in which cash is ______ ________ be recorded in it. A cash receipts journal may be used for a ______ as well as a ____________________ business. The Cash Receipts Journal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. October 1 – Sold merchandise on account to Green River Rafts, invoice no , $3,500; terms 2/10, n/30. Recording Cash Receipts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. October 4 – Sold $500 in merchandise and the customer used a credit card. Recording Cash Receipts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. As an alternative, many businesses postpone recording the amount of bank credit card expense until they receive notification from their bank or the bank statement. Assume that Whitewater Raft Supply had credit card sales of $11,448. The entry is as follows: Recording Cash Receipts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The restaurant’s next bank statement includes a debit memorandum for credit card charges of $457.92, using an assumed 4 percent discount rate ($11,448 x 0.04). The business handles this in a similar manner to a check service charge. Recording Cash Receipts

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The entry of October 1 does not involve cash, so it is not entered in the cash receipts journal. Cash was received on October 4, so the sale of merchandise involving a credit card is entered in the cash receipts journal. The Cash Receipts Journal In this entry, the “Account Credited” column is used to identify the $9,000 in “Other Accounts Credit” credit as a credit to D. M. Bruce, Capital for $9,000. Same “Other Accounts Credit” is used for the October 8 equipment transaction. On October 5, $416 was collected on account from L.R. Ray, a charge customer. The “Account Credited” column is used to identify the customer who made the payment.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Here are some other transactions made during the month that involved cash. The Cash Receipts Journal Notes Payable is used instead of Accounts Payable because a promissory note was issued.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Transactions generally can be recorded on one line. All transactions involving _______ to _____ are recorded in _____ place. It eliminates much repetition in posting when there are numerous transactions involving _____ _______. Special columns can be used for specialized transactions and posted as one total. Advantages of Using a Cash Receipt Journal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Practice Exercise 5

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Objective

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The __________________________ is a special journal used to record all transactions in which _____ ___________, or ___________. When the cash payments journal is used, all transactions in which _____ is _________ ______ be recorded in it. The cash payments journal may be used for either a _____ or a ___________ business. The Cash Payments Journal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. October 2 – Bought merchandise on account from Pataponia, Inc., invoice no. 2746, $2,500; terms 2/10, n/30; dated September 30; FOB San Francisco, freight prepaid and added to the invoice, $ The Cash Payments Journal October 8 – Issued Ck. No to Pataponia, Inc., in payment of invoice no. 2746, less cash discount of $50.00, $2, ($2, $50.00). Notice that the discount applies only to the amount billed for the merchandise (2 percent of $2,500)

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Cash Payments on the General Journal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. All expenditures except Petty Cash expenditures should be paid for by check. Thus, a column titled Ck. No. should be included in the Cash Payments Journal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Transactions generally can be recorded on _____ line. All transactions involving _____ to _______ are recorded in _____ place. It eliminates much repetition in posting when there are numerous transactions involving _______ _____. Special columns can be used for specialized transactions and posted as one total. Advantages of Using a Cash Payments Journal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Practice Exercise 6

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.