Embed Size (px)
DESCRIPTION
CHAPTER ELEVEN. ACCOUNTING FOR SALES AND CASH RECEIPTS. MERCHANDISING BUSINESS. Purchases merchandise from vendors/suppliers and sells that merchandise to customers Revenue is now from Sales. Rather than the performance of services. MERCHANDISING BUSINESSES. Retailer - PowerPoint PPT Presentation
Citation preview
CHAPTER ELEVEN
ACCOUNTING FOR SALES AND CASH
RECEIPTS
MERCHANDISING BUSINESS
Purchases merchandise from vendors/suppliers and sells that merchandise to customers
Revenue is now from Sales. Rather than the performance of services
MERCHANDISING BUSINESSES
RetailerSells to final consumersEvidenced by:
• Cash Register tape
• Sales Ticket
– One copy given to the customer and the other to the Accounting Department
MERCHANDISING BUSINESSES
WholesalerPurchases merchandise from manufacturerSells to retailers
• Usually “on account”
Sales Invoice generated for each sale• One to customer
• One to the Accounting Department
• One shipped with merchandise
CREDIT MEMORANDUM
Issued by seller indicating the customer’s Accounts Receivable account has been credited for the amount of a:Return - Merchandise returned for a refundAllowance - Customer is granted a price
reduction because of defect or other problems with the merchandise.
One copy of memo to the customer One copy sent to Accounting Department
MERCHANDISE REVENUE ACCOUNTS
SALES SALES TAX PAYABLE
SALES RETURNS & ALLOWANCES SALES DISCOUNTS
SALES ACCOUNT
SALESDR. CR.
REVENUE account used to record sales of merchandise. Similar to the Fees account used by a service business
The account is credited for the sellingprice of merchandise sold.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
Cash1
2
3
4
5
6
7
8
9
10
11
Example:Made $100 cash sale
100 00
Sales 100 00
Made cash sale
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
Cash1
2
3
4
5
6
7
8
9
10
11
What if this sale had been made on account?
100 00
Sales 100 00
Made cash sale
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
We would debit the Accounts Receivable
account instead of cash.
100 00Accts. Rec./Customer
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Customers name is enteredafter Accounts Receivable
in the journal.
100 00Accts. Rec./Customer
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
The Sales account is creditedbecause a sale has been made
(even though the business has not yet been paid for the merchandise).
100 00
Sales 100 00
Made credit sale
Accts. Rec./Customer
SALES TAX PAYABLE
SALES TAX PAYABLEDR. CR.
LIABILITY account used to record the taxes imposed on sales and owed to the taxing authority.
The account is credited for the amountof tax imposed on the sales.
SALES TAX PAYABLE
SALES TAX PAYABLEDR. CR.
LIABILITY account used to record the taxes imposed on sales and owed to the taxing authority.
The account is debited when the tax is paid to the proper taxing authority.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Example:A cash sale for $100 plus 5% sales tax.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Sales Tax would be $5($100 x 5%)
Therefore, cash receivedwould be $105.
($100 selling price + $5 tax)
Cash 105 00
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Sales is credited for the selling price,not the amount of cash received.
105 00
Sales 100 00Cash
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
$5 sales tax is creditedto Sales Tax Payable.
Cash 105 00
Sales 100 00
Sales Tax Payable 5 00Made cash sale
SALES RETURNS & ALLOWANCES
SALES RETURNS & ALLOWANCESDR. CR.
CONTRA-REVENUE account used to record sales returns and sales allowances. Shown as a deduction from Sales on the Income Statement
The account is debited when customerreturns merchandise or an allowance is granted.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Example:Credit customer, Susan Chang,
returns printer cartridges(selling price $40 plus $2 sales tax).
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Sales Returns & Allowances isdebited for the selling price.
Sales Returns &Allowances 40 00
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Sales Tax Payable isdebited for the tax of $2.
Sales Returns &Allowances 40 00
Sales Tax Payable 2 00
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Accounts Receivable iscredited for $42.
Sales Returns &Allowances 40 00
Sales Tax Payable 2 00
Accts. Receivable/Chang 42 00Issued credit memo for
returned merchandise
SALES DISCOUNTS
SALES DISCOUNTSDR. CR.
CONTRA-REVENUE account used to record discounts given to customers who buy merchandise on account to encourage prompt payment.
The account is debited for the amount of the Cash Discount at the time of payment.
CREDIT TERMS
2/10, n/30
2% discount offsales price
CREDIT TERMS
2/10, n/30
If paid within 10 days
CREDIT TERMS
2/10, n/30
Or the totalamount is due
CREDIT TERMS
2/10, n/30
In 30 days
CREDIT TERMS
1/10, n/30
1% off if paid in 10 days or
Total amount due in 30 days.
CREDIT TERMS
2/eom, n/60
2% off if paid beforethe end of the month
or Total amount due in 60 days.
CREDIT TERMS
3/10 eom, n/60
3% off if paid within 10 daysafter the end of month
or Total amount due in 60 days.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Example:Merchandise was sold for $100 with credit terms of 2/10, n/30,
and cash is received within the discount period.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
$100 sale x 2% discount
Cash 98 00
Sales Discounts 2 00
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 98 00
Sales Discounts 2 00
Accts. Receivable/Cust. 100 00Received cash on account
Income Statement
Sales Returns & Allowancesand Sales Discounts
are deducted from Sales in the Revenue section
of the Income Statement.
SalesLess: Sales returns and allowances
Sales discounts
$38,500$200140 340
Income Statement
SalesLess: Sales returns and allowances
Sales discountsNet Sales
$38,500$200140 340
$38,160
POSTING SALES TRANSACTIONS IN THE
GENERAL LEDGER In the ledger account:
Step 1: Enter the date.Step 2: Enter the amount of the transaction.Step 3: Update the balance.Step 4: Enter the journal page number.
In the journal:Step 5: Enter the ledger account number.
ACCOUNTS RECEIVABLE LEDGER
A separate “subsidiary” ledger Individual accounts receivable accounts
for each customer Often numbered Filed either alphabetically or numerically Accounts Receivable account in the
general ledger is the “controlling account.”
POSTING TO THE ACCOUNTS RECEIVABLE
LEDGER In the Accounts Receivable ledger:
Step 1: Enter the date.Step 2: Enter the amount.Step 3: Enter the new balance.Step 4: Enter the journal page number.
In the journal:Step 5: Enter a slash (/) followed by a check
mark () in the PR column.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Let’s review the posting for this transaction.
Accts. Receivable/Lorenzo 1,596 00
Sales 1,520 00
Sales Tax Payable 76 00Sale No. 133c
April 4
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
A $1,596 debit is postedto the General Ledger
Accounts Receivable account.
Accts. Rec./Lorenzo 1,596 00
Sales 1,520 00
Sales Tax Payable 76 00Sale No. 133c
April 4
FOUR-COLUMN ACCOUNT
Account: Account No.
DATE ITEM PR DR. CR.BALANCE
DR. CR.
ACCOUNTS RECEIVABLE 122
20--Apr. 1
1,596
12,000
4
Balance
13,596
This entry is posted in the same manneras all other general ledger postings.
J8
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Accts. Receivable account number is entered into the PR column.
Accts. Rec./Lorenzo 1,596 00
Sales 1,520 00
Sales Tax Payable 76 00Sale No. 133c
April 4 122
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Now we need to post to theindividual customer account.
Accts. Rec./Lorenzo 1,596 00
Sales 1,520 00
Sales Tax Payable 76 00Sale No. 133c
April 4 122
ACCOUNTS RECEIVABLE LEDGER
Name:
DATE ITEM PR DEBIT CREDITBALANCE
Enrico Lorenzo
20--Apr. 1,5964
Date is entered, Amount is recorded,Balance is updated, and
Journal page number is referenced.
Address: 5240 Tousley Court, Indianapolis, IN 46224-5678
1,596J8
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
A slash (/) is entered along with a check mark () which indicates the entry has been posted to the subsidiary ledger.
Accts. Rec./Lorenzo 1,596 00
Sales 1,520 00
Sales Tax Payable 76 00Sale No. 133c
April 4 122 /
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
The Sales and Sales Tax Payable entriesare posted to their general ledger accounts.
Accts. Rec./Lorenzo 1,596 00
Sales 1,520 00
Sales Tax Payable 76 00Sale No. 133c
April 4 122 /
401
231
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Sales Returns &Allow. 40 00
Sales Tax Payable 2 00
Accts. Rec./S. Chang 42 00Returned Merchandise -
May 5
Credit Memo #72
Now let’s look at the postingfor a Sales Return entry.
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Sales Returns and Allowances is posted in the normal manner.
Its account number isrecorded in the PR column.
Sales Returns &Allow. 40 00
Sales Tax Payable 2 00
Accts. Rec./S. Chang 42 00Returned Merchandise -
May 5
Credit Memo #72
401.1
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Sales Tax Payable is also posted in the normal manner.
Its account number isrecorded in the PR column.
Sales Returns &Allow. 40 00
Sales Tax Payable 2 00
Accts. Rec./S. Chang 42 00Returned Merchandise -
May 5
Credit Memo #72
401.1
231
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
The $42 credit is posted to theAccounts Receivable controlling account
and to the Subsidiary ledger accountfor S. Chang.
Sales Returns &Allow. 40 00
Sales Tax Payable 2 00
Accts. Rec./S. Chang 42 00Returned Merchandise -
May 5
Credit Memo #72
401.1
231
122/
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 1,596 00
Accts. Rec./E. Lorenzo
Received cash on account
April 14
Cash Receipt transactionsare posted in a similar manner.
1,596 00
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 1,596 00
Accts. Rec./E. Lorenzo
Received cash on account
April 14
Cash is posted as usual.
1,596 00101
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 1,596 00
Accts. Rec./E. Lorenzo
Received cash on account
April 14
1,596 00101
The credit is posted to theAccounts Receivable controlling account
and to the Subsidiary ledger accountfor E. Lorenzo.
122/
BANK CREDIT CARD SALES
Similar to cash sales because cash is available to the business as soon as an electronic deposit is made at the end of the day
Business receives amount of sale.Less a processing fee
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Made a bank credit card sale of $100 (plus $5 tax).
The seller will receive cash of $100.80.($105 - 4% fee)
Cash 100 80May 6
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Bank Credit Card Expense is debited for the processing fee.
Cash 100 80
Bank Credit Card Exp. 4 20
May 6
GENERAL JOURNAL
DATE DESCRIPTION PR DEBIT CREDIT
1
2
3
4
5
6
7
8
9
10
11
Cash 100 80
Bank Credit Card Exp. 4 20
Sales 100 00
May 6
Made Credit Card Sale
Sales Tax Payable 5 00
SCHEDULE OF ACCOUNTS RECEIVABLE
Prepared to verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance
Listing of customers and their balances Usually prepared at the end of the month Total of the balances listed is compared
with the balance in the Accounts Receivable account.
Northern MicroSchedule of Accounts Receivable
April 30, 20--
$2,302Helen AverySusan ChangHeidi SchwitzerKen UlmetVivian Winston
6513,5633,3154,500
$14,331
This should be the balance in the Accounts Receivable controlling account.
ERRORS
If the Schedule of Accounts Receivable total and the Accounts Receivable balance do not agree:Step 1 Verify the total of the schedule.Step 2 Verify the postings to the accounts
receivable ledger.Step 3 Verify the postings to the Accounts
Receivable in the general ledger.
