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Section 3Analyzing Cash Receipt Transactions What You’ll Learn How to record cash receipt transactions. The use of the Sales Discounts account, and its rules of debit and credit. What You’ll Learn How to record cash receipt transactions. The use of the Sales Discounts account, and its rules of debit and credit.
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Why It’s Important It is essential to understand the various ways that businesses receive cash and how to record the receipt of cash. Why It’s Important It is essential to understand the various ways that businesses receive cash and how to record the receipt of cash. Key Terms cash receipt cash sale bankcard Key Terms cash receipt cash sale bankcard Section 3Analyzing Cash Receipt Transactions (con’t.) cash discount sales discount cash discount sales discount
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3 most common kinds of Cash Receipts for a merchandising business. payments from charge customers cash sales bankcard sales payments from charge customers cash sales bankcard sales Section 3Analyzing Cash Receipt Transactions (con’t.)
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Cash Sales The business receives full payment for merchandise sold at the time of the sale. Most retailers use a cash register to record cash sales. The business receives full payment for merchandise sold at the time of the sale. Most retailers use a cash register to record cash sales. Section 3Analyzing Cash Receipt Transactions (con’t.) Cash Sales Sales Tax
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Cash from Charge Customers Businesses record cash received on account from charge customers by preparing receipts. Receipts are pre-numbered and may be prepared in multiple copies. The receipt is a source document for the journal entry. Businesses record cash received on account from charge customers by preparing receipts. Receipts are pre-numbered and may be prepared in multiple copies. The receipt is a source document for the journal entry. Section 3Analyzing Cash Receipt Transactions (con’t.)
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Bankcard Sales A bankcard is issued by a bank and honored by many businesses. Bankcard sales are recorded as though they are cash sales. The store receives cash from the bank soon after it is deposited. A bankcard is issued by a bank and honored by many businesses. Bankcard sales are recorded as though they are cash sales. The store receives cash from the bank soon after it is deposited. Section 3Analyzing Cash Receipt Transactions (con’t.) Bankcard Sales Sales Tax Most common are VISA, MasterCard, and Discover.
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Cash Discounts A cash discount, or sales discount, is the amount a customer can deduct from the amount owed for purchased merchandise if payment is made within a certain time. Terms 2/10, n/30 means that the customer can deduct 2% of the cost of merchandise if payment is made within 10 days of the sale date. A cash discount, or sales discount, is the amount a customer can deduct from the amount owed for purchased merchandise if payment is made within a certain time. Terms 2/10, n/30 means that the customer can deduct 2% of the cost of merchandise if payment is made within 10 days of the sale date. Section 3Analyzing Cash Receipt Transactions (con’t.)
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Cash Discount Transactions On December 3 On Your Mark sold $1,500 worth of merchandise on account to South Branch High School Athletics (no tax because school). The sale will be recorded in accounts receivable and sales for the full $1,500. On December 3 On Your Mark sold $1,500 worth of merchandise on account to South Branch High School Athletics (no tax because school). The sale will be recorded in accounts receivable and sales for the full $1,500. Section 3Analyzing Cash Receipt Transactions (con’t.)
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Cash Discount Transactions (con’t.) 1. MerchandiseDiscount SoldX Rate=Discount $1,500 X.02=$30 2. Amount Paid Within Sales SlipDiscountDiscount Amount – Amount = Period $1,500–$30=$1,470 1. MerchandiseDiscount SoldX Rate=Discount $1,500 X.02=$30 2. Amount Paid Within Sales SlipDiscountDiscount Amount – Amount = Period $1,500–$30=$1,470 Section 3Analyzing Cash Receipt Transactions (con’t.)
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Cash Discount Transactions con’t. If South Branch pays within 10 days (by December 13), On Your Mark will receive $1,470, or the original price less the cash discount of $30. The actual payment will be recorded as follows: Cash in bank will be DR for $1,470 Accounts Receivable is credited for the full $1,500 because the customer paid for the merchandise and doesn’t owe any more on the purchase. Sales Discounts (contra account to sales) will be DR for the $30 discount. If South Branch pays within 10 days (by December 13), On Your Mark will receive $1,470, or the original price less the cash discount of $30. The actual payment will be recorded as follows: Cash in bank will be DR for $1,470 Accounts Receivable is credited for the full $1,500 because the customer paid for the merchandise and doesn’t owe any more on the purchase. Sales Discounts (contra account to sales) will be DR for the $30 discount.
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Section 3Analyzing Cash Receipt Transactions (con’t.) Cash Discount Transactions con’t. 20-- Nov 2 1470 -- 30 -- Accounts Receivable/Liz Perry Cash in Bank Sales Discount 1500 -- 3 Source Document
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Business Transaction ANALYSIS Identify1.The accounts affected are Cash in Bank, Accounts Receivable (controlling), Accounts Receivable—Casey Klein (subsidiary). On December 5 On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. Recording Cash Received from Charge Customers Section 3Analyzing Cash Receipt Transactions (con’t.)
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Business Transaction (con’t.) ANALYSIS Classify2.Cash in Bank, Accounts Receivable (controlling) and Accounts Receivable—Casey Klein (subsidiary) are asset accounts. Section 3Analyzing Cash Receipt Transactions (con’t.) Recording Cash Received from Charge Customers (con’t.) On December 5 On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.
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Business Transaction (con’t.) ANALYSIS + / –3.Cash in Bank is increased by $212. Accounts Receivable (controlling) and Accounts Receivable—Casey Klein (subsidiary) are decreased by $212. Section 3Analyzing Cash Receipt Transactions (con’t.) Recording Cash Received from Charge Customers (con’t.) On December 5 On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.
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Business Transaction (con’t.) DEBIT-CREDIT RULE 4.Increases to asset accounts are recorded as debits. Debit Cash in Bank for $212. 5.Decreases to asset accounts are recorded as credits. Credit Accounts Receivable (controlling) for $212. Also credit Accounts Receivable—Casey Klein (subsidiary) for $212. Section 3Analyzing Cash Receipt Transactions (con’t.) Recording Cash Received from Charge Customers (con’t.) On December 5 On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.
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T ACCOUNTS 6. Cash inAccounts BankReceivable Business Transaction (con’t.) Debit + 212 Credit – 212 Credit – Accounts Receivable Subsidiary Ledger Casey Klein Debit + Credit – 212 Section 3Analyzing Cash Receipt Transactions (con’t.) Recording Cash Received from Charge Customers (con’t.) On December 5 On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. Debit +
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Business Transaction (con’t.) JOURNAL ENTRY 7. Section 3Analyzing Cash Receipt Transactions (con’t.) Recording Cash Received from Charge Customers (con’t.) On December 5 On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301.
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Demonstration Problems Ch14-3
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Discount is off of the price of the merchandise before the sale. 60.-- 4.50 49.70 --.-- 25.20
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20-- Jan 12 Sales Discount 3626 -- 74.-- Cash In Bank Receipt 1112 Accounts Receivable/Lincoln H.S. 3700.-- 9
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Check Your Understanding Section 3Analyzing Cash Receipt Transactions (con’t.) P376 ALL
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