1. Journalizing Sales & Cash Receipts Chapter 12

2. Merchandising Business Two major activities… ▫Purchases ▫Sales Customer: a person or business to whom merchandise or services are sold. Every business’ records must keep track of…. ▫Total sales ▫Total sales tax

3. Sales Tax A tax on sales of merchandise or service. price of goods x sales tax rate = sales tax Example: ▫price of goods x sales tax rate = sales tax $200 x 6% = $12 ▫price of goods + sales tax = total amount received $200 + $12 = $212

4. Sales Tax The account used to keep track of sales tax is Sales Tax Payable. An amount owed to the government. Liability Normal Credit balance

5. Journalizing Sales & Cash Receipts A sale on merchandise may be for… ▫Cash ▫On account Cash and credit card sales: ▫Cash Sale: cash received at the time of the sale ▫Credit Card Sale: a credit card is used for the total amount of the sale at the time of the sale

6. Journalizing Sales & Cash Receipts Recorded cash and credit card sales, $6,450, plus sales tax, $387; total $6,837. T7 What accounts are used? ▫Cash, Sales, Sales Tax Payable How is each account affected? ▫Cash increases, Sales increases, Sales Tax Payable Increases Debit Cash, Credit Sales, Credit Sales Tax Payable

7. Sale on Account A sale for which cash will be received at a later date. Also called a charge sale. Accounts Receivable: Account used to record a sale on account. Sales invoice: source document used

8. Accounts Receivable Keeps track of all amounts due from customers. Something of value to the company Asset Normal Debit Balance

9. Cash Receipts Received cash on account from Autohaus Service, $1802, covering S65. R86 What accounts are used? ▫Accounts Receivable and Cash How is each account affected? ▫Accounts Receivable decreases, Cash increases Accounts Receivable Credit, Cash Debit

10. Prove Journal Total debits must equal total credits Add up the Debit column totals Add up the Credit column totals The two totals need to equal.