Section 3Analyzing Cash Receipt Transactions What You’ll Learn  How to record cash receipt transactions.  The use of the Sales Discounts account, and its rules of debit and credit. What You’ll Learn  How to record cash receipt transactions.  The use of the Sales Discounts account, and its rules of debit and credit.

Why It’s Important It is essential to understand the various ways that businesses receive cash and how to record the receipt of cash. Why It’s Important It is essential to understand the various ways that businesses receive cash and how to record the receipt of cash. Key Terms  cash receipt  cash sale  bankcard Key Terms  cash receipt  cash sale  bankcard Section 3Analyzing Cash Receipt Transactions (cont'd.)  cash discount  sales discount  cash discount  sales discount

Kinds of Cash Receipts  payments from charge customers  cash sales  bankcard sales  payments from charge customers  cash sales  bankcard sales Section 3Analyzing Cash Receipt Transactions (cont'd.)

Cash Sales  The business receives full payment for merchandise sold at the time of the sale.  Most retailers use a cash register to record cash sales.  The business receives full payment for merchandise sold at the time of the sale.  Most retailers use a cash register to record cash sales. Section 3Analyzing Cash Receipt Transactions (cont'd.) Cash Sales Sales Tax

Cash from Charge Customers  Businesses record cash received on account from charge customers by preparing receipts.  Receipts are pre-numbered and may be prepared in multiple copies.  The receipt is a source document for the journal entry.  Businesses record cash received on account from charge customers by preparing receipts.  Receipts are pre-numbered and may be prepared in multiple copies.  The receipt is a source document for the journal entry. Section 3Analyzing Cash Receipt Transactions (cont'd.)

Bankcard Sales  A bankcard is issued by a bank and honored by many businesses.  Bankcard sales are recorded as though they are cash sales.  A bankcard is issued by a bank and honored by many businesses.  Bankcard sales are recorded as though they are cash sales. Section 3Analyzing Cash Receipt Transactions (cont'd.) Bankcard Sales Sales Tax

Cash Discounts  A cash discount, or sales discount, is the amount a customer can deduct from the amount owed for purchased merchandise if payment is made within a certain time.  Terms 2/10, n/30 means that the customer can deduct 2% of the cost of merchandise if payment is made within 10 days of the sale date. Otherwise, the full (net) amount is due within 30 days.  A cash discount, or sales discount, is the amount a customer can deduct from the amount owed for purchased merchandise if payment is made within a certain time.  Terms 2/10, n/30 means that the customer can deduct 2% of the cost of merchandise if payment is made within 10 days of the sale date. Otherwise, the full (net) amount is due within 30 days. Section 3Analyzing Cash Receipt Transactions (cont'd.)

Cash Discount Transactions On December 3, On Your Mark sold $1,500 worth of merchandise on account to South Branch High School Athletics. If South Branch pays within 10 days (by December 13), On Your Mark will receive $1,470, or the original price less the cash discount of $30. On December 3, On Your Mark sold $1,500 worth of merchandise on account to South Branch High School Athletics. If South Branch pays within 10 days (by December 13), On Your Mark will receive $1,470, or the original price less the cash discount of $30. Section 3Analyzing Cash Receipt Transactions (cont'd.)

Cash Discount Transactions (cont'd.) 1. MerchandiseDiscount SoldX Rate=Discount 1. MerchandiseDiscount SoldX Rate=Discount Section 3Analyzing Cash Receipt Transactions (cont'd.) 2. Amount Paid Within Sales SlipDiscountDiscount Amount – Amount = Period 2. Amount Paid Within Sales SlipDiscountDiscount Amount – Amount = Period $1,500 X.02=$30 $1,500 X.02=$30 $1,500–$30=$1,470 $1,500–$30=$1,470

Business Transaction ANALYSIS Identify1.The accounts affected are Cash in Bank, Accounts Receivable (controlling), and Accounts Receivable—Casey Klein (subsidiary). On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. Recording Cash Received from Charge Customers Section 3Analyzing Cash Receipt Transactions (cont'd.)

Business Transaction (cont'd.) ANALYSIS Classify2.Cash in Bank, Accounts Receivable (controlling), and Accounts Receivable—Casey Klein (subsidiary) are asset accounts. Section 3Analyzing Cash Receipt Transactions (cont'd.) Recording Cash Received from Charge Customers (cont'd.) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.

Business Transaction (cont'd.) ANALYSIS + / –3.Cash in Bank is increased by $212. Accounts Receivable (controlling) and Accounts Receivable—Casey Klein (subsidiary) are decreased by $212. Section 3Analyzing Cash Receipt Transactions (cont'd.) Recording Cash Received from Charge Customers (cont'd.) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.

Business Transaction (cont'd.) DEBIT-CREDIT RULE 4.Increases to asset accounts are recorded as debits. Debit Cash in Bank for $ Decreases to asset accounts are recorded as credits. Credit Accounts Receivable (controlling) for $212. Also credit Accounts Receivable—Casey Klein (subsidiary) for $212. Section 3Analyzing Cash Receipt Transactions (cont'd.) Recording Cash Received from Charge Customers (cont'd.) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.

T ACCOUNTS 6. Cash inAccounts BankReceivable Business Transaction (cont'd.) Debit Credit – 212 Credit – Accounts Receivable Subsidiary Ledger Casey Klein Debit + Credit – 212 Section 3Analyzing Cash Receipt Transactions (cont'd.) Recording Cash Received from Charge Customers (cont'd.) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. Debit +

Business Transaction (cont'd.) JOURNAL ENTRY 7. Section 3Analyzing Cash Receipt Transactions (cont'd.) Recording Cash Received from Charge Customers (cont'd.) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.

Check Your Understanding Explain the benefits of a cash discount. Section 3Analyzing Cash Receipt Transactions (cont'd.)