Accounting for Sales and Receipts

Chapter 14

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

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

Pg 381

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

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

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

Pg 387

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

• 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

Journalizing a Return from an On

Account Sale

Pg 390

Posting to the

Accounts Receivable

Subsidiary Ledger

Pg 391

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

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

Payment from a

Charge Customer

Pg 396

Cash Discount

PaymentsPg 397

Cash Sales Pg 398

Bankcard Sales

Pg 399

Other Sales

Pg 400

Pg 400