College Accounting A Contemporary Approach

College Accounting A Contemporary Approach
Fourth Edition Chapter 7 Accounting for Sales, Accounts Receivable, and Cash Receipts PowerPoint Presentations for College Accounting: A Contemporary Approach, 4th edition By Haddock, Price, and Farina Chapter 7 Accounting for Sales, Accounts Receivable, and Cash Receipts Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Learning Objectives (1 of 2)
SECTION 1: Understanding Merchandising Companies 7-1 Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Chapter 6 explained the closing process and post-closing trial balance. Chapter 7 explains the accounting processes for retail and wholesale sales. In this first of the two sections, we are introduced to recording transactions for a retailer in a general journal. SECTION 1: Understanding Merchandising Companies The objectives of this chapter are listed here. 7-1 Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. SECTION 2: Special Topics in Merchandising 7-2 Compute trade discounts. 7-3 Compute and record cash discounts on sales. 7-4 Post from the general journal to the general ledger accounts and to the subsidiary ledger. 7-5 Prepare a schedule of accounts receivable. 7-6 Record the payment of sales taxes. 7-7 Define the accounting terms new to this chapter.

Learning Objectives (2 of 2)
SECTION 2: Special Topics in Merchandising 7-2 Compute trade discounts. 7-3 Compute and record cash discounts on sales. 7-4 Post from the general journal to the general ledger accounts and to the subsidiary ledger. 7-5 Prepare a schedule of accounts receivable. 7-6 Record the payment of sales taxes. 7-7 Define the accounting terms new to this chapter.

Meet Maxx-Out Sporting Goods
Section 1 Meet Maxx-Out Sporting Goods Maxx-Out Sporting Goods is a merchandising business that sells the latest sporting goods and sportswear for men, women, and children. It is a retail business. Max Ferraro is the sole proprietor of the firm. The Maxx-Out Sporting Goods will sell goods that it purchases from its suppliers and will keep track of its available-for-sale stock in an account called Merchandise Inventory. Section 1 There are three types of business operations: service, merchandising, and manufacturing. A service business provides a service to its customers. A merchandising business, sells a product to its customers and generates a profit on those sales. A manufacturing business makes a product and sells its product to customers or to retailers who then sell it to customers. In this chapter, we will be working with a merchandising business called the Maxx-Out Sporting Goods. A retailer is another name for a merchandising business. It sells directly to the customer. The Maxx-Out Sporting Goods will sell goods that it purchases from its suppliers and will keep track of its available-for-sale stock in an account called Merchandise Inventory. Merchandise inventory is the stock of goods a merchandising business keeps on hand. Merchandise Inventory is an asset account which will appear on the balance sheet.

Accounts of a Merchandising Companies
Section 1 Accounts of a Merchandising Companies Name of Accounts Type of Account Normal Balance Used to Record Sales Revenue CR Sales of merchandise inventory Sales Tax Payable Liability CA Sales tax charged to customers Sales Discounts Contra revenue DR Early payment discounts given to buyer by seller Sales Returns and Allowances Products retuned by buyer on the seller's backs Credit Card Expense Expense Fees charged by credit card companies to seller Section 1, The new accounts we will be using in this chapter are summarized in this slide.

Section 1: Understanding Merchandising Companies
Learning Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Section 1: Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal.

Recording Sales for Cash and On Account (1 of 3)
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales for Cash and On Account (1 of 3) The journal entry to record a sale of $500 for cash on January 2 Section 1, Objective 7-1: The Sales account is the primary revenue account for a merchandising company. Let’s suppose Maxx-Out Sporting Goods sells merchandise for cash and on account. The journal entry to record a sale of $500 for cash on January 2 is provided in this slide.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales for Cash and On Account (2 of 3) On January 3, Maxx-Out Sporting Goods sold merchandise on credit to Roy Anderson, issuing Sales Slip 1101 for $400. The journal entry to record the sale appears below. Section 1, Objective 7-1: Maxx-Out Sporting Goods also grants credit terms to certain customers. One of those customers is Roy Anderson. On January 3, Maxx-Out Sporting Goods sold merchandise on credit to Roy Anderson, issuing Sales Slip 1101 for $400. The journal entry to record that sale is presented in this slide.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales for Cash and On Account (3 of 3) The journal entry records Roy Anderson’s payment of the amount due on January 31. Section 1, Objective 7-1: The journal entry presented in the slide records Roy Anderson’s payment of the amount due on January 31.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales with Sales Tax Payable for Cash and On Account (1 of 3) The journal entry to record a sale of $500 plus tax for cash follows. A liability account called Sales Tax Payable is credited for the sales tax charged. Section 1, Objective 7-1: Most state and many local governments impose a sales tax on the sale of certain goods and services. Businesses are required to collect this tax from their customers and pay to tax agency. When taxable goods and services are sold on credit, the sales tax is usually recorded at time of sale, even though it will be collected from the customer later. A liability account called Sales Tax Payable is credited for the sales tax charged. If Maxx-Out Sporting Goods was required to charge its customers an 8 percent sales tax, the amount collected for the sales tax on a $500 sale for cash would be $40 ($500 * 8% = $40). The amount collected from the customer would be $540 ($500 for the merchandise, plus $40 for the sales tax). The journal entry to record a sale of $500 plus tax for cash is presented in the slide.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales with Sales Tax Payable for Cash and On Account (2 of 3) The journal entry to record the sale of merchandise on credit. Section 1, Objective 7-1: If Maxx-Out Sporting Goods sold merchandise on credit to Ann Anh on January 8 for $600 plus tax, it would bill Ann Anh for $600 plus tax of $48 (600 * 8% = $48). The total amount billed would be $648 ($600 for the merchandise, plus $48 for the sales tax). The journal entry to record that sale is presented in the slide.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales with Sales Tax Payable for Cash and On Account (3 of 3) The Sales Slip tells us who the customer is and the sales amount, the sales tax charged and the total amount that the customer must pay. Section 1, Objective 7-1: The sales slip tells us who the customer is and the sales amount, the sales tax charged and the total amount that the customer must pay.

Recording Sales Returns and Sales Allowances (1 of 3)
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales Returns and Sales Allowances (1 of 3) If something is wrong with the goods sold, the firm may take a sales return, or give a sales allowance. A cash refund is given in the case of a cash sale A credit memorandum is given in the case of a credit sale Section 1, Objective 7-1: If something is wrong with the goods sold, the firm may take back the goods, resulting in a sales return. Or, they may negotiate a reduction in the sales price, resulting in a sales allowance. If the goods returned were initially paid for with cash, the customer will receive a cash refund. When a return or allowance is related to a credit sale, the normal practice is to issue a document called a credit memorandum to the customer instead of giving a cash refund.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales Returns and Sales Allowances (2 of 3) The Sales Returns and Allowances account is debited to record returns and allowances. Section 1, Objective 7-1: When a customer returns a product, the business makes an opposite entry of that of a sale, but instead of debiting the Sales account, we debit the Sales Returns and Allowances account. By debiting Sales Returns and Allowances instead of debiting the Sales account, management can monitor the balance of the Sales Returns and Allowances account and see if product returns or allowances increase. The Sales Returns and Allowances account is a contra-revenue account that keeps track of all customer returns. A contra revenue account is an account with a debit balance, which is contrary to the normal balance for a revenue account.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Recording Sales Returns and Sales Allowances (3 of 3) The Sales Returns and Allowances account is a contra-revenue account that keeps track of all customer returns. A contra revenue account is an account with a debit balance, which is contrary to the normal balance for a revenue account.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Cash Refunds The journal entry to record a cash refund for a return of $100 in merchandise sold for cash, plus sales tax of $8, can be seen below: Section 1, Objective 7-1: The journal entry to record a cash refund for a return on January 2 of $100 in merchandise sold for cash, plus sales tax of $8, is presented in the slide.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Credit Memorandum Here is an example of a sales allowance which is granted to Ann Anh. Section 1, Objective 7-1: Here is an example of a sales allowance which is granted to Ann Anh. Let’s revisit the sale on account to Ann Anh of $600 plus sales tax of $48 recorded January 8, If Maxx-Out Sporting Goods issued Credit Memorandum 101 on January 20 for a return of $200 merchandise purchased on account by Ann Anh, plus 8 percent sales tax, the credit memorandum would total $216 ($200 for the merchandise returned, plus $16 sales tax previously billed to Ann Anh).

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Sales Allowance Section 1, Objective 7-1: The Sales Returns and Allowances account will be debited for $200 and the Sales Tax Payable account will be debited for $16. The corresponding credit of $216 will go to the customer’s Accounts Receivable account. Here is how it looks in the T accounts. A sales allowance will reduce net sales on the income statement and will reduce Accounts Receivable and Sales Tax Payable on the balance sheet.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Credit Sales (1 of 2) Advantages of Credit Sales The volume of both sales and profits will increase, if buyers are given a period of a month or more to pay for the goods or services they purchase. Section 1, Objective 7-1: The use of credit is considered to be one of the most important factors in the rapid growth of businesses today. Stores grant credit to make it easier for customers to purchase goods. Like anything else, there are advantages and disadvantages.

Credit Sales (2 of 2) Disadvantages of Credit Sales
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Credit Sales (2 of 2) Disadvantages of Credit Sales Sales on credit will lead to increases in profit only if each customer completes the transaction by paying for the goods or services purchased. If payment is not received, the expected profits become actual losses and the purpose for granting the credit is defeated. Therefore businesses need to closely analyze a customer’s ability to pay before granting credit.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Credit Policies Each business must develop well-balanced credit policies: Credit policy that is too tight may result in both lower bad debt losses and reduced sales. Credit policy that is too lenient may result in both higher bad debt losses and increased sales. Section 1, Objective 7-1: Decisions about granting credit may be based on personal judgment or on reports available from credit bureaus, information supplied by other creditors, and credit ratings supplied by national firms such as Dun & Bradstreet.

Types of Credit Sales Open-account credit Business credit cards
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Types of Credit Sales Open-account credit Business credit cards Bank credit cards Cards issued by credit card companies Section 1, Objective 7-1: The four most common types of credit sales are: Open-account credit, Business credit cards, Bank credit cards, and Cards issued by credit card companies. You should become familiar with what each one is and how to account for each type of transaction.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Open-Account Credit Open-account credit sales and business credit card sales are accounted for as sales on credit. Section 1, Objective 7-1: Open-account credit sales and business credit card sales are accounted for as sales on credit. Sales to customers using bank credit cards, and cards issued by credit card companies, require special accounting procedures.

Accounting for Credit Card Sales (1 of 3)
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Accounting for Credit Card Sales (1 of 3) Sales made to customers using bank credit cards, such as MasterCard and VISA are treated as cash sales. The processing fees charged by the credit card company are debited to the Credit Card Expense account. Section 1, Objective 7-1: Sales made to customers paying with bank credit cards, such as MasterCard and VISA, are treated as cash sales. In most cases, the amount processed on the card is transferred to the seller’s bank account the same day. Fees charged by the credit card company for processing these sales are debited to an account called Credit Card Expense.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Accounting for Credit Card Sales (2 of 3) Maxx-Out Sporting Goods sells merchandise on January 15 totaling $900 to customers using bank credit cards, plus 8 percent sales tax. The bank credit card company charges a 3 percent discount fee.

Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Accounting for Credit Card Sales (3 of 3) Merchandise sale $ Plus sales tax ($ * 8%) 72.00 $ Less: bank fee ($ * 3%) -29.16 Debit to Cash $ Let’s look at the journal entry on the next slide….

Credit Card Transactions
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Credit Card Transactions Journal entry to record the sales made to customers using bank credit cards on January 15. Section 1, Objective 7-1: This is how a journal entry to record the sales made to customers using bank credit cards on January 15 should look.

Credit Card Companies (1 of 2)
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Credit Card Companies (1 of 2) Sales to customers using nonbank credit cards such as American Express and Diners Club are accounted for as sales on account. Nonbank credit cards usually take a few days to pay the seller. The amount remitted to the seller is net of the discount fee Section 1, Objective 7-1: If a customer pays with a nonbank credit card such as American Express, the sale is accounted for as sales on account. The amount remitted to the seller should equal the net of the discount fee.

Credit Card Companies (2 of 2)
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. Credit Card Companies (2 of 2) This is an example of sales to customers using nonbank credit cards Maxx-Out Sporting Goods sells merchandise on January 16 totaling $1,000 to customers paying with American Express, plus 8 percent sales tax. American Express charges a 7 percent discount fee. The discount withheld by American Express would be $75.60 ($1, X 7%) Section 1, Objective 7-1: This is an example of sales to customers using nonbank credit cards

American Express Charges and Payments
Section 1, Objective 7-1: Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal. American Express Charges and Payments Journal entry to record the sales on January 16 and the subsequent payment on January 23 by American Express Section 1, Objective 7-1: This is how a journal entry to record the sales of a payment by American Express should look.

Section 2: Special Topics in Merchandising
Learning Objective 7-2: Compute trade discounts. Section 2: Objective 7-2: Compute trade discounts. In section 2 we will learn how to record transactions for a wholesaler.

Computing Trade Discounts
Section 2, Objective 7-2: Compute trade discounts. Computing Trade Discounts The basic procedures used by wholesalers to handle sales and accounts receivable are the same as those used by retailers. However, many wholesalers offer: Cash discounts (For customers that pay within a certain period) *Trade discounts (A reduction from the list price) *The amount of the trade discount may depend on the size of the order and the costs of selling to the various types of customers. Section 2, Objective 7-2: How do wholesale businesses record credit sales? A wholesale business is a firm which sells goods to another firm who will then sell it to the final consumer. When businesses sell goods to other businesses, they frequently offer trade and/or cash discounts, which vary according to the nature of the business. Trade discounts are not the same as cash discounts. A trade discount is a reduction from the list price. (The list price is the established retail price.) The net price is the list price less all trade discounts. The amount of the trade discount may depend on the size of the order and the costs of selling to the various types of customers. When a firm offers more than one discount on the same sale then this is considered a series of trade discounts.

Learning Objective 7-3: Compute and record cash discounts on sales. Section 2: Objective 7-3: Compute and record cash discounts on sales.

Computing and Recording Cash Discounts on Sales
Section 2, Objective 7-3: Compute and record cash discounts on sales. Computing and Recording Cash Discounts on Sales Modern Sportsman, a wholesaler, offers credit terms of 1/10,n/30 to its customer, Maxx-Out Sporting Goods. Here are the journal entries to record the sale and subsequent payment received from Maxx-Out. Section 2, Objective 7-3: Modern Sportsman, a wholesaler, offers credit terms of 1/10, n/30 to its customers. On January 20, Modern Sportsman sold merchandise for $2,000 on account to Maxx-Out Sporting Goods, issuing Invoice 909. Modern Sportsman received payment for Invoice 909, less the cash discount of $20 ($2,000 1%), on January 29.

Cash Discounts on Sales, with Sales Returns
Section 2, Objective 7-3: Compute and record cash discounts on sales. Cash Discounts on Sales, with Sales Returns A customer returning merchandise and paying within the discount period is only entitled to a cash discount on the balance owed after the return. Original sale $1,000.00 Less return 100.00 Balance 900.00 Less 1% discount ($ x 1%) 9.00 Amount received $ Section 2, Objective 7-3: Modern Sportsman sells merchandise for $1,000 on account to Maxx-Out Sporting Goods on January 21, terms 1/10, n/30, Invoice 910. Maxx-Out Sporting Goods returned $100 of the merchandise on January 23, receiving credit memorandum 120 from Modern Sportsman. Maxx-Out Sporting Goods paid the balance owed, less a 1 percent discount, on January 30. The amount received by Modern Sportsman on January 30 would be $891, calculated as presented in the slide.

Reporting Net Sales (1 of 2)
Section 2, Objective 7-3: Compute and record cash discounts on sales. Reporting Net Sales (1 of 2) At the end of each accounting period, the balance of the Sales Returns and Allowances account and the Sales Discount account is subtracted from the balance of the Sales account in the Revenue section of the income statement. Section 2, Objective 7-3: At the end of each accounting period, the balance of the Sales Returns and Allowances account and the Sales Discount account is subtracted from the balance of the Sales account in the Revenue section of the income statement. The resulting figure is the net sales for the month ended January 31, 2019. For example, the Sales Returns and Allowances account contains a balance of $600 at the end of January. The Sales Discount account balance is $100 at the end of January. The Sales account has a balance of $25,700 at the end of January. The Revenue section of the firm’s income statement is presented in the slide. Notice how the $25,000 of net sales is derived.

Reporting Net Sales (2 of 2)
Section 2, Objective 7-3: Compute and record cash discounts on sales. Reporting Net Sales (2 of 2)

Learning Objective 7-4: Post from the general journal to the general ledger accounts and to the subsidiary ledger. Section 2: Objective 7-4: Post from the general journal to the general ledger accounts and to the subsidiary ledger

The Accounts Receivable Ledger (1 of 2)
Section 2, Objective 7-4: Post from the general journal to the general ledger accounts and to the subsidiary ledger. The Accounts Receivable Ledger (1 of 2) Section 2, Objective 7-4: Accounts receivable is a big asset on the balance sheet for most businesses. This asset must be converted into cash in a timely manner. If not, cash flow problems will exist. An accounts receivable ledger is a subsidiary ledger that contains credit customer accounts. This ledger makes it possible to verify that customers are paying their balances on time and that they are within their credit limits. It also provides a convenient way to answer questions from customers regarding their current balances or about a possible billing error. A subsidiary ledger has three money columns. Because a business doesn’t want to wait until the end of the month to find out which customers still owe them money, any time a customer’s account is affected, the subsidiary ledger must be updated that same day.

The Accounts Receivable Ledger (2 of 2)
Section 2, Objective 7-4: Post from the general journal to the general ledger accounts and to the subsidiary ledger. The Accounts Receivable Ledger (2 of 2) The accounts receivable ledger has three money columns. The BALANCE column is presumed to contain debit amounts.

Posting from the General Journal (1 of 2)
Section 2, Objective 7-4: Post from the general journal to the general ledger accounts and to the subsidiary ledger. Posting from the General Journal (1 of 2) Section 2, Objective 7-4: Each sales return or allowance must be posted from the journal to the appropriate customer’s account in the accounts receivable ledger. In addition, any subsidiary ledger accounts must be updated daily. Please note the double posting reference if the return had been journalized in a general journal instead. 111 indicates that the amount was posted to the Accounts Receivable account in the general ledger. The check mark indicates that the amount was posted to the customer’s account

Posting from the General Journal (2 of 2)
Section 2, Objective 7-4: Post from the general journal to the general ledger accounts and to the subsidiary ledger. Posting from the General Journal (2 of 2)

Learning Objective 7-5: Prepare a schedule of accounts receivable. Section 2: Objective 7-5: Prepare a schedule of accounts receivable.

Prepare a Schedule of Accounts Receivable (1 of 5)
Section 2, Objective 7-5: Prepare a schedule of accounts receivable. Prepare a Schedule of Accounts Receivable (1 of 5) The use of an accounts receivable ledger does not eliminate the need for the Accounts Receivable account in the general ledger. However, the Accounts Receivable account (in the General Ledger) is now considered a control account. Section 2, Objective 7-5: At the end of each month, after all the postings have been made, the balances in the accounts receivable ledger must be proved against the balance of the Accounts Receivable general ledger account. First a schedule of accounts receivable, which lists the subsidiary ledger accounts balances, is prepared. The total of the schedule is compared with the balance of the Accounts Receivable account. If the two figures are not equal, errors must be located and corrected.

Section 2, Objective 7-5: Prepare a schedule of accounts receivable. Prepare a Schedule of Accounts Receivable (2 of 5) At the end of each month, after all the postings have been made, the balances in the accounts receivable ledger must be proved against the balance of the Accounts Receivable general ledger account. TOTAL OF INDIVIDUAL CUSTOMER BALANCES = ACCOUNTS RECEIVABLE BALANCE Section 2, Objective 7-5: The schedule of accounts receivable is simply a list of all of your customers and how much they owe.

Section 2, Objective 7-5: Prepare a schedule of accounts receivable. Prepare a Schedule of Accounts Receivable (3 of 5) Section 2, Objective 7-5: The schedule of accounts receivable is particularly important to a business owner or credit manager in keeping track of how much money someone owes the company and for how long that amount has been outstanding.

Section 2, Objective 7-5: Prepare a schedule of accounts receivable. Prepare a Schedule of Accounts Receivable (4 of 5) The figure illustrates the relationship between the Accounts Receivable balance, the Accounts Receivable ledger, and the Schedule of Accounts Receivable

Section 2, Objective 7-5: Prepare a schedule of accounts receivable. Prepare a Schedule of Accounts Receivable (5 of 5) Section 2, Objective 7-5: The figure illustrates the relationship between the Accounts Receivable balance, the Accounts Receivable ledger, and the Schedule of Accounts Receivable.

Learning Objective 7-6: Record the payment of sales taxes. Section 2: Objective 7-6: Record the payment of sales taxes.

Record the Payment of Sales Taxes (1 of 3)
Section 2, Objective 7-6: Record the payment of sales taxes. Record the Payment of Sales Taxes (1 of 3) At the end of each month, after all the accounts have been posted, Maxx-Out Sporting Goods prepares the sales tax return. Three accounts are involved: Sales Tax Payable Sales Sales Returns and Allowances Section 2, Objective 7-6: A sales tax may be levied on all retail sales, but often certain items are exempt. The retailer is required to collect sales tax from customers, make periodic reports to the taxing authority, and pay the taxes due when the reports are filed. Sales taxes collected must be submitted to the state on a regular basis. Sales tax returns are filed monthly or quarterly depending on the state. Maxx-Out Sporting Goods submits its sales taxes collected at the end of the month. It will complete a sales tax return.

Section 2, Objective 7-6: Record the payment of sales taxes. Record the Payment of Sales Taxes (2 of 3) Taxable gross sales for the month were $25,000. (This includes sales less any returns and allowances.) Based on the sales tax return, Maxx-Out Sporting Goods owes $2,000 of sales tax to the state. This particular state allows an offset or discount in the amount of $20, so the net taxes owed are $1,

Section 2, Objective 7-6: Record the payment of sales taxes. Record the Payment of Sales Taxes (3 of 3) Sales Tax Computation Taxable Gross Sales for January $ 25,000.00 8% Sales Tax Rate x 0.08 Sales Tax Due $ 2,000.00

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