1. Accounting for sales and cash receipts
Chapter 14

2. Acct’g for a Merchandising Business
Retailer – a business that sells to the final user
Wholesaler – a business that sells to retailers

3. Operating Cycle of a Merchandising Business
Figure 14-1 (pg 380)
Purchase Goods
Sell Goods
Cash or Credit
Pay Expenses
Profit
See Chart of Accounts on Pg 381
What’s different compared to Pg 79

4. Accounts used by a Merchandising Business
Merchandise Inventory Account
Asset
Merchandise – Goods bought for resale
Inventory – Merchandise a business has in stock
Sales Account
Revenue
Problem 14-1

5. Analyzing Sales Transactions
Sale on account
Credit sale, charge sale
Charge customer
Credit Cards
Bank vs. Nonbank credit cards
Nonbank credit card sales are recorded as credit transactions.

6. Analyzing Sales Transactions
Sales slip – a form that lists the details of the sale
Sales tax –
Sales Tax Payable
Not everyone pays sales tax
Credit terms – state the time allowed for payment
n/30; net 30

7. Accounts Receivable Subsidiary Ledger
Accounts Receivable Subsidiary Ledger – A separate ledger that contains an account for each charge customer.
Subsidiary Ledger – a ledger that contains detailed data summarized to a controlling account.
Controlling Account – An account whose balance equals the sum of all the balances in a subsidiary ledger

8. Sales Returns and Allowances
Sales return – Merchandise returned for credit or a cash refund
Damaged, defective, wrong size, etc.
Sales allowance – A price reduction granted for damaged goods kept by the customer
Credit Memorandum – Source document for a sales return or allowance
Contra Account – An account whose balance decreases the balance of the controlling account

9. Posting to the Subsidiary Ledger
List both accounts in the journal
Use a slash
Post to both accounts
Controlling Account #
√ mark
Problem 14-2

10. Analyzing Cash Receipt Transactions
Cash Receipt – A transaction in which money is received by the company
Cash Sale – Company receives cash at the time of sale
Source document will be the cash register tape (receipt)
Business should total and clear register daily
Tape will indicate Cash sales and sales tax collected.
Also lists bankcard sales

11. Cash Discounts
Cash Discount or Sales Discount – Amount a customer can deduct from the amount owed if purchase is made within a certain time
2/10, n/30: Customer can take a 2% discount if paid within 10 days; otherwise payment is due w/in 30 days
Sales Discounts is a contra revenue account
Problem 14-3 & 14-4
Problem 14-6, Post first transaction together