1. $ $ $ $ Section 2 Analyzing Sales Transactions What You’ll Learn
Chapter 14 $
Section 2 Analyzing Sales Transactions
What You’ll Learn
How to record the sale of merchandise on account.
How to use the accounts receivable subsidiary ledger.
How to post to the accounts receivable subsidiary ledger.
The use of the Sales Tax Payable account, and its rules of debit and credit.
The use of the Sales Returns and Allowances account, and its rules of debit and credit. $ $ $

2. $ $ $ $ Why It’s Important Key Terms Chapter 14 sale on account
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Why It’s Important
It is essential to record sales transactions correctly as they reflect the revenue of the business. $
Key Terms
sale on account
charge customer
credit cards
sales slip
sales tax
credit terms
accounts receivable subsidiary ledger $
subsidiary ledger
controlling account
sales return
sales allowance
credit memorandum
contra account $

3. $ $ $ $ The Sales Slip Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
The Sales Slip
A sales slip lists the details of a sale: $
The date of the sale.
The name of the customer.
The description, quantity, and price of the item(s) sold. $ $

4. Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Sales Tax
Most states and some cities tax the retail sale of goods and services. This tax is called a sales tax. The sales tax rate is usually stated as a percentage of the sale, such as 5%. The business keeps a record of the sales tax owed to the state in a liability account called Sales Tax Payable. $ $ $
Sales Tax Payable
Debit –
Decrease Side
Credit +
Increase Side
Normal Balance

5. $ $ $ $ Credit Terms Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Credit Terms
Credit terms state the time allowed for payment.
The credit terms for the sale to Casey Klein are n/30.
The “n” stands for the net, or total, amount of the sale.
The “30” stands for the number of days the customer has to pay for the merchandise. $ $ $

6. $ $ $ $ The Accounts Receivable Ledger Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
The Accounts Receivable Ledger
A subsidiary ledger is a ledger, or book, that contains detailed data summarized to a controlling account in the general ledger. $ $ $

7. $ $ $ $ The Accounts Receivable Ledger Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
The Accounts Receivable Ledger
The accounts receivable subsidiary ledger contains an account for each charge customer. $
General Ledger
Accounts Receivable—controlling account $10,000
Accounts Receivable Subsidiary Ledger
Individual Accounts Within Ledger:
Brown, Joshua $2,000
Clark, Gillian 3,000
Greene, Jason 1,000
Perez, Sarita 4,000
Total $10,000 $
Controlling account balance equals total of accounts in subsidiary ledger. $

8. $ $ $ $  The Accounts Receivable Subsidiary Ledger Form Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
The Accounts Receivable Subsidiary Ledger Form $
The subsidiary ledger account form has lines at the top for the name and address of the customer. $
Gabriel Ramos
278 Summit Ave., Dallas, TX 75206 $
20-- 
Dec 1
Balance
159-- 4
G20
159--

9. $ $ $ $ Recording Sales on Account Chapter 14 Business Transaction
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Recording Sales
on Account $
Business Transaction
On December 1 On Your Mark sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50. $
ANALYSIS Identify 1. The accounts affected are Accounts Receivable (controlling), Accounts Receivable—Casey Klein (subsidiary), Sales, and Sales Tax Payable. $

10. Business Transaction (con’t.)
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Recording Sales on Account (con’t.)
Business Transaction (con’t.) $
On December 1 On Your Mark sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50. $
ANALYSIS Classify 2. Accounts Receivable (controlling) and Accounts Receivable—Casey Klein (subsidiary) are asset accounts. Sales is a revenue account. Sales Tax Payable is a liability account. $

11. Business Transaction (con’t.)
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Recording Sales on Account (con’t.)
Business Transaction (con’t.) $
On December 1 On Your Mark sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50.
ANALYSIS + / – 3. Accounts Receivable (controlling) and Accounts Receivable—Casey Klein (subsidiary) are increased by the total amount, $212 (dollar amount of merchandise sold plus sales tax). Sales is increased by the dollar amount of merchandise sold, $200. Sales Tax Payable is increased by the amount of sales tax charged, $12. $ $

12. Business Transaction (con’t.)
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Recording Sales on Account (con’t.)
Business Transaction (con’t.) $
On December 1 On Your Mark sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50. $
DEBIT-CREDIT RULE 4. Increases to asset accounts are recorded as debits. Debit Accounts Receivable (controlling) for $212. Also debit Accounts Receivable—Casey Klein (subsidiary) for $212.
5. Increases to revenue and liability accounts are recorded as credits. Credit Sales for $200 and Sales Tax Payable for $12. $

13. Business Transaction (con’t.)
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Recording Sales on Account (con’t.)
Business Transaction (con’t.)
On December 1 On Your Mark sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50. $
T ACCOUNTS 6.
Accounts
Receivable Sales $
Debit +
212
Credit –
Debit –
Credit +
200 $
Accounts Receivable
Subsidiary Ledger Sales Tax Casey Klein Payable
Debit +
212
Credit –
Debit –
Credit +
200

14. Business Transaction (con’t.)
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Recording Sales on Account (con’t.)
Business Transaction (con’t.) $
On December 1 On Your Mark sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50.
The diagonal line indicates the amount is posted in two places. First to the controlling account and then to the subsidiary account. $
JOURNAL ENTRY 7. $

15. $ $ $ $ Sales Returns and Allowances Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Sales Returns and Allowances
Any merchandise returned for credit or a cash refund is called a sales return.
A price reduction granted for damaged goods kept by the customer is called a sales allowance. $ $ $

16. $ $ $ $ Sales Returns and Allowances (con’t.) Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Sales Returns and Allowances (con’t.)
A credit memorandum lists the details of a sales return or allowance. $ $ $

17. Sales Returns and Allowances
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
The Sales Returns and Allowances Account
decreases the total revenue earned by a business;
summarizes the total returns and allowances for damaged, defective, or other otherwise unsatisfactory merchandise;
is a contra account. $ $ $
Sales Returns and Allowances
Debit +
Increase Side
Normal Balance
Credit –
Decrease Side

18. $ $ $ $ The Sales Returns and Allowances Account Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
The Sales Returns and Allowances Account
A contra account balance decreases the balance of a its related account. The normal balance side of any contra account is always the opposite of the normal balance side of its related account. $ $ $

19. $ $ $ $ The Sales Returns and Allowances Account Chapter 14
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
The Sales Returns and Allowances Account
Business Transaction $
On December 4 On
Your Mark issued
Credit Memorandum 124
to Gabriel Ramos for the
return of merchandise
purchased on account,
$150 plus $9 sales tax. $
JOURNAL ENTRY 7. $

20. Demonstration Problems for Ch14-2

21. $9.00
$159.00
$25.20
$445.20
$52.50
$927.50
$78.00 $
$156.00 $

22. 3 20-- 636 -- 600 -- 36 -- Nov 2 Accounts Receivable/Liz Perry Sales
Sales Tax Payable
36 --
Sales Slip 101

23. 1 20-- 120 -- 7.20 127.20 Dec 28 Sales Returns & Allowances
Sales Tax Payable
7.20
Accounts Receivable/Josh Riley
127.20
Credit Memo 51

24. Thinking Critically 1-3 Problem 14-2 $ $ $ $
Section 2 Analyzing Sales Transactions (con’t.)
Chapter 14 $
Check Your Understanding p366 $
Thinking Critically 1-3
Problem 14-2 $ $