1. Chapter 14

2.   Retailer – a business that sells to the final user (consumer).  Wholesaler – a business that sells to retailers. The Operating Cycle of a Merchandising Business Pg 380

3.  New and Different Accounts  Change Fund  Petty Cash Fund  Allowance for Uncollectible Accounts  Notes Receivable/Payable  Interest Receivable  Merchandise Inventory  Prepaid Insurance  Delivery Equipment  Accumulated Depreciation  Discount on Notes Payable  Sales Tax Payable  Capital Stock  Retained Earnings  Sales  Sales Discount  Sales/Purchases Returns and Allowances  Interest Income  Purchases  Transportation In  Purchases Discount Bankcard Fees Expense Cash Short and Over Depreciation Expense Insurance Expense Interest Expense Loss/Gain on Disposal of Plant Assets Uncollectible Accounts Expense Pg 381

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5.   Merchandise – goods bought for resale.  Inventory – merchandise on hand for resale  Merchandise Inventory Account –  Asset Account  Increased with a debit and decreased with a credit  Sales Account – When a retailer sells goods to a customer the amount of the merchandise sold is recorded in the Sales account.  Sales is a revenue account  Increase with a credit and decrease with a debit  Both cash sales and sales on account are recorded here Accounts Used by a Merchandising Business Pg 382

6.   Sales on account  Credit cards (store and bank)  Sales Slip – a form that lists date of sale, customer account identification and description, quantity, and price of the items sold.  Sales slips are pre-numbered to help businesses keep track of all sales made on account  Sales Tax – most states and some cities tax the retail sale of goods and services.  Sales taxes are periodically sent to the state (or city). Until they are sent, the business holds them in a Sales Tax Payable account.  Credit Terms – The sales slip usually has a spot for credit terms on it. n/30 means net amount due in 30 days Analyzing Sales Transactions Pg 385

7.   Small businesses with few Accounts Receivable accounts usually list them individually in the General Ledger. Large businesses with many Accounts Receivable accounts keep a separate Accounts Receivable Subsidiary Ledger with the individual accounts listed and then have an Accounts Receivable (controlling account) listed in the General Ledger that is a total of all individual accounts in the subsidiary ledger. The Account Receivable Subsidiary Ledger Pg 385

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9.   Sales Return – Any merchandise returned for credit or cash refund  Sales Allowance – a price reduction granted for damaged goods kept by the customer.  Credit Memorandum – If the sales return or allowance occurs on a charge sale, the business usually prepares a credit memo. It lists the details of a sales return or allowance and the customer’s account is credited for the amount returned or allowed. Sales Returns and Allowances Pg 388

10.  Sales Returns and Allowances Account – decreases the total revenue earned by a business. Contra Account – an account that offsets or decreases another account Sales Returns and Allowances is a contra account to Sales Contra accounts have the opposite normal balance sides as the accounts they offset. Pg 389

11.  Journalizing a Return from an On Account Sale Pg 390

12.  Posting to the Accounts Receivable Subsidiary Ledger Pg 391

13.   Cash Receipt – a transaction in which money is received by a business.  Cash Sales – full payment at the time of sale  Charge Customer Payments – When a customer comes in to pay on their account, the employee prepares a receipt. The receipt number is the source document.  Bankcard Sales – the bank pays the store and then the bank collects at a later date from the customer  Other Cash Receipts – bank loans, sale of assets Cash Transactions Pg 393

14.   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. This is to encourage customers to pay promptly.  2/10, n/30 means 2% discount it paid within 10 days if not the entire amount is due in 30 days. Cash Discounts 1.Merchandise Sold X Discount Rate = Discount $1500 X.02 = $30 2.Sales Slip Amount - Discount Amount = Amount Paid Within Discount Period $1500 - $30 = $1470 Pg 395

15.  Payment from a Charge Customer Pg 396

16.  Cash Discount Payments Pg 397

17.  Cash Sales Pg 398

18.  Bankcard Sales Pg 399

19.  Other Sales Pg 400

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