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2. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting A wholesaler sells to retailers, and a retailer sells to the final users. In addition to using the general ledger, a business keeps a subsidiary ledger of individual customer accounts. Merchandising businesses receive cash from cash sales, payments on account, bankcard sales, and occasionally from other types of transactions Glencoe AccountingCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Home

3. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Explain the difference between a service business and a merchandising business. Explain the difference between a retailer and a wholesaler. Analyze transactions relating to the sale of merchandise. Record sales and cash receipt transactions in a general journal. Glencoe AccountingCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Home

4. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Terms retailer wholesaler merchandise inventory sales Accounting for a Merchandising Business Section 14.1 Home

5. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Operating Cycle of Merchandising Business retailer A business that sells to the final user, the consumer. Most merchandising businesses are both Retailers Wholesalers wholesaler A business that sells to the retailers. Accounting for a Merchandising Business Section 14.1 Home

6. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Operating Cycle of a Merchandising Business Accounting for a Merchandising Business Section 14.1 See page 383 Home

7. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Accounts Used by a Merchandising Business merchandise Goods bought to resell to customers. Accounting for a Merchandising Business Section 14.1 A merchandising business buys merchandise from a wholesaler or manufacturer. A merchandising business sells goods to its customers. A merchandising business keeps an inventory. inventory The items of merchandise a business has in stock. Home

8. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Accounts Used by a Merchandising Business Accounting for a Merchandising Business Section 14.1 Merchandise Inventory Account Inventory is represented in the general ledger by the asset account Merchandise Inventory. The normal balance of this account is a debit. Merchandise is bought and sold during the operating cycle. The purchase and sale of merchandise is recorded in separate accounts. Home

9. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Accounts Used by a Merchandising Business Accounting for a Merchandising Business Section 14.1 Sales Account The amount of the merchandise sold is recorded in the sales account. Increases to sales are recorded as debits. The normal balance of the sales account is a credit. Sales on account affect the Accounts Receivable account and cash sales affect the Cash in Bank account. sales A revenue account to record the amount of the merchandise sold. Home

10. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting International Sales Accounting for a Merchandising Business Section 14.1 The United Nations Convention on Contracts for the International Sales of Goods (CISG) Created to provide guidelines and laws governing the international sale of goods Does not cover the sales of all goods Governs most business-to-business transactions Home

11. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Terms sale on account charge customer credit card sales slip sales tax credit terms accounts receivable subsidiary ledger Analyzing Sales Transactions Section 14.2 subsidiary ledger controlling account sales return sales allowance credit memorandum contra account Home

12. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Sales on Account Analyzing Sales Transactions Section 14.2 A sale on account is made to a charge customer. sale on account The sale of merchandise that will be paid for at a later date. charge customer A customer to whom a sale on account is made. Home

13. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Sales on Account Analyzing Sales Transactions Section 14.2 A store credit card facilitates sales on account. credit card A card issued by a business containing a customer’s name and account number that facilitates the sale on account. Home

14. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Sales on Account Analyzing Sales Transactions Section 14.2 A charge sale involves: sales slip sales tax credit terms sales slip A form that lists the details of a sale. sales tax A tax levied by a city or state on the retail sale of goods and services. credit terms Terms that state the time allowed for payment for a sale on account. Home

15. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Sales on Account Analyzing Sales Transactions Section 14.2 Items on a sales slip include: Date of the Sale Customer account identification Description, quantity, and price of items sold There are usually multiple copies of the sales slip with at least one for the customer and one for accounting purposes. Home

16. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Sales on Account Analyzing Sales Transactions Section 14.2 Sales Tax A business periodically sends the collection of sales tax to the state. Until then, the amount owed is recorded in a liability account called Sales Tax Payable. Home

17. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Sales on Account Analyzing Sales Transactions Section 14.2 The credit terms are listed on the sales slip. credit terms Terms that state the time allowed for payment for a sale on account. See page 388 Home

18. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Accounts Receivable Subsidiary Ledger Analyzing Sales Transactions Section 14.2 accounts receivable subsidiary ledger A separate ledger that contains accounts for each charge customer; it is summarized in the Accounts Receivable controlling account in the general ledger. What is the accounts receivable subsidiary ledger? Home

19. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Accounts Receivable Subsidiary Ledger Analyzing Sales Transactions Section 14.2 controlling account An account that serves as a control on the accuracy of the account balances in the subsidiary ledger; its balance must equal the total of all account balances in the subsidiary ledger. See page 389 Home

20. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Accounts Receivable Subsidiary Ledger Analyzing Sales Transactions Section 14.2 Subsidiary Ledger Account Form subsidiary ledger A ledger with detailed data that is summarized in a controlling account in the general ledger. See page 389 Home

21. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Sales on Account Analyzing Sales Transactions Section 14.2 Recording a sale on account Recorded at the time of sale Revenue must be realizable Home

22. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Sales on Account Analyzing Sales Transactions Section 14.2 Business Transaction On December 1 The Starting Line sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50. See page 390 Home

23. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Sales on Account Analyzing Sales Transactions Section 14.2 On December 3 The Starting Line sold merchandise on account to South Branch High School Athletics for $1,500, Sales Slip 51. Business Transaction See page 391 Home

24. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Sales on Account Analyzing Sales Transactions Section 14.2 A merchant performs a sales return for customers who are unhappy with their purchases. A sales allowance may be issued by the merchant if merchandise is damaged prior to purchase. sales return Any merchandise returned for credit or a cash refund. sales allowance A price reduction granted for damaged goods kept by the customer. Home

25. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Sales on Account Analyzing Sales Transactions Section 14.2 Credit Memorandum credit memorandum A form that lists the details of a sales return or sales allowance. See page 392 Home

26. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Sales on Account Analyzing Sales Transactions Section 14.2 The Sales Returns and Allowances account is a contra account. contra account An account whose balance is a decrease to its related account. Home

27. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Sales on Account Analyzing Sales Transactions Section 14.2 Sometimes a cash refund is given and the Cash in Bank account is credited instead of Accounts Receivable. Home

28. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Posting to the Accounts Receivable Subsidiary Ledger Analyzing Sales Transactions Section 14.2 On December 4 The Starting Line issued Credit Memorandum 124 to Gabriel Ramos for the return of merchandise purchased on account, $150 plus $9 sales tax. Business Transaction See page 393 Home

29. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Posting to the Accounts Receivable Subsidiary Ledger Analyzing Sales Transactions Section 14.2 See page 394 Home

30. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Posting to the Accounts Receivable Subsidiary Ledger Analyzing Sales Transactions Section 14.2 See page 394 Home

31. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Terms cash receipt cash sale cash discount sales discount Analyzing Cash Receipt Transactions Section 14.3 Home

32. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Cash Transactions Analyzing Cash Receipt Transactions Section 14.3 Four Kinds of Cash Receipts cash receipt The cash received by a business in a single transaction. cash sale A transaction in which the business received full payment for the merchandise sold at the time of the sale. Cash Sales Charge Customer Payments Bankcard Sales Other Cash Receipts Sales are recorded on two tapes The register tape lists the total cash sales and tax collected Businesses record cash received on account from charge customers on pre- numbered receipts Can be processed manually or electronically Debit and credit card sales are recorded like cash sales Cash may be received from –Bank loans –Sale of assets other than merchandise Home

33. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Cash Discounts Analyzing Cash Receipt Transactions Section 14.3 cash discount or sales discount The amount a customer can deduct from the total owed for purchased merchandise if payment is made within a certain time; also called sales discount. A cash discount, or sales discount, is an advantage to both the buyer and the seller. The buyer receives merchandise at a reduced cost. The seller receives cash quickly. Home

34. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Receipts Analyzing Cash Receipt Transactions Section 14.3 Recording Cash from Four Sources Charge Customer Payments Cash Discount Payments Cash Sales Bankcard Sales Home

35. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Receipts Analyzing Cash Receipt Transactions Section 14.3 On December 5 The Starting Line received $212 from Casey Klein to apply to her account, Receipt 301. Charge Customer Payments Business Transaction See page 399 Home

36. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Receipts Analyzing Cash Receipt Transactions Section 14.3 On December 12 The Starting Line received $1,470 from South Branch High School Athletics in payment of Sales Slip 51 for $1,500 less the discount of $30, Receipt 302. Cash Discount Payments Business Transaction See page 400 Home

37. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Receipts Analyzing Cash Receipt Transactions Section 14.3 On December 15 The Starting Line had cash sales of $3,000 and collected $180 in sales taxes, Tape 55. Cash Sales Business Transaction See page 401 Home

38. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Receipts Analyzing Cash Receipt Transactions Section 14.3 The Starting Line had bankcard sales of $700 and collected $42 in related sales taxes on December 15, Tape 55. Bankcard Sales Business Transaction See page 402 Home

39. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Recording Cash Receipts Analyzing Cash Receipt Transactions Section 14.3 On December 16, The Starting Line received $30 from Mandy Harris, an office employee. She purchased a calculator that the business was no longer using, Receipt 303. Other Cash Receipts Business Transaction See page 403 Home

40. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Question 1 List the operating cycle for a merchandising business. Step 1: Purchase goods for resale Step 2a:Sell goods for cash (skip to step 4). Step 2b: Sell goods on account. Step 3: Collect cash from accounts. Step 4: Pay expenses. Home

41. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Question 1 A customer bought merchandise on February 1 totaling $1,800.00. As an incentive to get this customer to pay early, you offer terms of 1/20, n/30. The customer pays on February 15. Calculate the following: Total sale amount __________ Amount of discount__________ Net cash received__________ Now indicate whether you would debit or credit the following accounts. Accounts Receivable __________ Customer’s subsidiary account__________ Sales Discounts__________ Cash in Bank__________ $1,800.00 $18.00 $1,782.00 Credit Debit Home

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