1. Chapter 9 Sales and Cash Receipts

2. Learning Objectives
Explain and Journalize Entries for Sales, Sales Discounts, and Sales Returns and Allowances
Record to Subsidiary Ledgers and Post to General Ledger Sales Transactions and Returns
Record and Post Cash Receipts Transactions and Prepare a Schedule of Accounts Receivable

3. Learning Objective 1
Explain and Journalize Entries for Sales, Sales Discounts, and Sales Returns and Allowances

4. Seller’s View of a Merchandise Company – Gross Sales
Retailer – a business that buys items from manufacturers and wholesalers and resells them to customers
Gross Sales – cash or charge sales rung up or recorded in a register

5. Seller’s View of a Merchandise Company – Sales and Returns
Figure 9.1 Recording Cash and Charge Sales for the Day
Sales Journal Entry
Sales Returns and Allowances - either a price reduction, new product or refund (Contra Revenue)
Figure 9.2 Issuing a Credit Memorandum in the General Journal

6. Seller’s View of a Merchandise Company – Sales Discount
Sales Discount – percentage reduction on invoice for prompt payments (Contra Revenue)
Discount period is the time when a discount is granted

7. Seller’s View of a Merchandise Company – Discount Period
Discount period is the time when a discount is granted
Credit period is the length of time allowed to pay the amount owed on the bill

8. Seller’s View of a Merchandise Company – Sales Discount
Figure 9.3 Recording Sales Discount

9. Sales Tax Payable
Taxes collected on sales and forwarded to the state.
This is a liability to the retailer
The sales tax on the cash purchase is calculated as follows:
$1,800 × .05 = $90 Tax
$1,800 + $90 tax = $1,890 Cash

10. $1,200 Charge + $60 Tax = $1,260 Accounts Receivable
Sales Tax Payable
Here is how the sales tax on the charge sale is computed:
$1,200 × .05 = $60 Tax
$1,200 Charge + $60 Tax = $1,260 Accounts Receivable
Figure 9.4 Sales with Sales Tax

11. Sales Tax Payable

12. Learning Objective 2
Record to Subsidiary Ledgers and Post to General Ledger Sales Transactions and Returns

13. Transactions on Account for Art’s Wholesale Clothing Company
Art’s Wholesale Clothing Company, as a wholesaler, buys merchandise from suppliers and sells it to retailers, who in turn sell it to individual consumers.
The following transactions occurred in April for Art’s Wholesale Clothing Company:

14. Sales Invoice
Figure 9.5 Sales Invoice

15. April 3 Sold account merchandise to Hal’s Clothing, $800
April 3 Sold account merchandise to Hal’s Clothing, $800. Terms 2/10, n/30.
The analysis
The journal entry
Figure 9.6 Merchandise Sold and Accounts Receivable

16. Accounts Receivable Subsidiary Ledgers
A special ledger
Contains a single type of account
Subsidiary account for each customer
Arranged alphabetically
Can be in the form of a file, a notebook, or computer tapes or disks
Posted to general ledger and recorded to the subsidiary ledger

17. Accounts Receivable Subsidiary Ledger
Figure 9.7 Partial General Ledger of Art’s Wholesale Clothing Company and Accounts Receivable Subsidiary Ledger

18. Accounts Receivable Subsidiary Ledgers
The general ledger account is called the controlling account.
It summarizes or controls the subsidiary ledger.
The total of the individual accounts will equal the controlling account ending balance.

19. The Transactions that Occurred In April
Figure 9.8 Before Posting and Recording Sales Transactions

20. Posting and Recording Sales Transactions

21. Posting and Recording Sales Transactions
When the subsidiary ledger is updated, a (✓) is placed in the PR column of the general journal
Figure 9.9 Transaction for April 3 Posted and Recorded

22. Figure 9.9 Transaction for April 3 Posted and Recorded (cont.)

23. The Credit Memorandum Notification sent to a customer
Indicates the amount of the goods returned or amount allowed for damaged goods
The amount is subtracted (credited) from the customer’s account

24. Sample Credit Memorandum
Figure 9.10 Sample Credit Memorandum from Art’s Wholesale Clothing Company

25. Postings and Recordings for the Credit Memorandum
Figure 9.11 Postings and Recording for the Credit Memorandum into the Subsidiary and General Ledgers

26. Learning Objective 3
Record and Post Cash Receipts Transactions and Prepare a Schedule of Accounts Receivable

27. Cash Receipts Transactions
Cash receipts for sales are journalized and posted
Cash receipts on account are
Journalized for the month
Posted to the general ledger
Posted to the accounts receivable subsidiary ledger

28. Cash Receipts Transactions Examples

29. Received check from Hal’s Clothing for payment of invoice no
Received check from Hal’s Clothing for payment of invoice no. 1, less 2% discount.
Figure 9.12 Recording Sales Discount in General Journal

30. Cash Receipts Transactions Occurred For Art’s Wholesale Clothing In April
Figure 9.13 Journalized Cash Receipts Transactions

31. Figure 9.13 Journalized Cash Receipts Transactions (cont.)

32. Cash Receipts Transactions Occurred For Art’s Wholesale Clothing In April

33. Cash Receipts Transactions Posted to the Ledger and Subsidiary Ledger

34. Schedule of Accounts Receivable
Figure 9.14 Schedule of Accounts Receivable

35. Summary of the chapter
Sales Returns and Allowances and Sales Discount are contra-revenue accounts.
Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts.
Discounts are not taken on sales tax, freight, or goods returned. The discount period is shorter than the credit period.
Sales Tax Payable is a liability account.
The normal balance of the accounts receivable subsidiary ledger is a debit balance.

36. Summary of the chapter
A () in the PR of the general journal means the subsidiary ledger has been updated.
The accounts receivable subsidiary ledger, organized in alphabetical order, is not in the same book as Accounts Receivable, the controlling account in the general ledger.
When a credit memorandum is issued, the result is that Sales Returns and Allowances increase and Accounts Receivable decreases.
When we record this entry into the general journal, we assume all parts of the transaction will be posted to the general ledger and recorded in the subsidiary ledger.

37. Summary of the chapter
At the end of the month, the total of all customers’ ending balances in the accounts receivable subsidiary ledger should be equal to the ending balance in Accounts Receivable, the controlling account in the general ledger.
The schedule of accounts receivable is an alphabetical list of companies with an outstanding balance.

38. Questions?

39. Figure 9.15 General Journal for September 18 and 19 and Blank Accounts Receivable Subsidiary Ledger

40. Figure 9.16 General Journal for May 18 and 19 and Blank Accounts Receivable Subsidiary Ledger