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College

Accounting

Heintz & ParryHeintz & Parry2020thth EditionEdition

Accounting for Sales and Cash Receipts

10Chapter

1

Describe merchandise

sales transactions.

Merchandising Business

• Purchases merchandise from vendors/suppliers and sells that merchandise to customers

• A sale is a transfer of merchandise from one business or individual to another in exchange for cash or a promise to pay cash

Retailer

• Sells to final consumers

– Evidenced by:

Cash register tape

Sales ticket

One copy of the sales ticket is given to the customer and the other copy is sent to accounting

Wholesaler

• Purchases merchandise from the manufacturer

• Sells to retailers

� Usually “on account”

• A sales invoice is generated for each sale

� One is sent to the customer as a bill for the

merchandise

� One is sent to accounting to record the sale

� One is shipped with the merchandise

Credit Memorandum

• Issued by the seller indicating the customer’s accounts receivable account has been credited for the amount of a:

� Returno Merchandise returned for a refund

� Allowanceo Price reduction granted by the seller because of

defects or other problems with the merchandise

• One copy of the credit memo is sent to the customer

• One copy is sent to accounting

2

Describe and use

merchandise sales

accounts.

Merchandise Sales Accounts

SALES SALES TAX PAYABLE

SALES RETURNS

AND ALLOWANCES SALES DISCOUNTS

Sales Account

SALES

DR. CR.

+

A REVENUE account used to record sales of merchandise.

–

Cash Sale Journal Entry

DATE DESCRIPTION PR DEBIT CREDIT

Cash1

2

3

4

5

6

7

8

9

10

11

100 00

Sales 100 00

Made cash sale



Cash1

2

3

4

5

6

7

8

9

10

11

100 00

Sales 100 00

Made cash sale

Credit Sale Journal Entry


1

2

3

4

5

6

7

8

9

10

11

100 00Accts. Receivable/Customer



1

2

3

4

5

6

7

8

9

10

11

100 00Accts. Receivable/Customer



1

2

3

4

5

6

7

8

9

10

11

100 00

Sales 100 00

Made credit sale

Accts. Receivable/Customer

Sales Tax Payable Account

SALES TAX PAYABLE

DR. CR.

+

A LIABILITY account used to record the taxes imposed on sales and owed to the taxing

authority.

–

Sales Tax Payable Account

SALES TAX PAYABLE

DR. CR.

+

A LIABILITY account used to record the taxes imposed on sales and owed to the taxing

authority.

–



1

2

3

4

5

6

7

8

9

10

11



1

2

3

4

5

6

7

8

9

10

11

Cash 105 00



1

2

3

4

5

6

7

8

9

10

11

105 00

Sales 100 00

Cash



1

2

3

4

5

6

7

8

9

10

11

Cash 105 00

Sales 100 00

Sales Tax Payable 5 00

Made cash sale



1

2

3

4

5

6

7

8

9

10

11

Accts. Receivable/Customer 105 00

Sales 100 00


Made cash sale

Sales Returns And Allowances Account

SALES RETURNS

AND ALLOWANCES

DR. CR.

A CONTRA-REVENUE account used to record

sales returns and sales allowances. Shown as a deduction from Sales on the income statement.

+ –

Sales Return Journal Entry


1

2

3

4

5

6

7

8

9

10

11

Example:A credit customer, Susan Chang,

returns printer cartridges(selling price $40 + $2 sales tax).



1

2

3

4

5

6

7

8

9

10

11

Sales Returns and Allowances 40 00



1

2

3

4

5

6

7

8

9

10

11





1

2

3

4

5

6

7

8

9

10

11



Accts. Receivable/S. Chang 42 00

Issued credit memo for

returned merchandise

Sales Discounts Account

SALES DISCOUNTSDR. CR.

A CONTRA-REVENUE account used to record discounts given to customers who buy

merchandise on account to encourage prompt payment.

+ –

Credit Terms

2/10, n/30

Credit Terms

2/10, n/30

Credit Terms

2/10, n/30

Credit Terms

2/10, n/30

Credit Terms

1/10, n/30

Credit Terms

2/eom, n/60

Credit Terms

3/10 eom, n/60

Sales Discounts Journal Entry


1

2

3

4

5

6

7

8

9

10

11



1

2

3

4

5

6

7

8

9

10

11


Sales 100 00

Made sale on account



1

2

3

4

5

6

7

8

9

10

11

Cash 98 00

Sales Discounts 2 00



1

2

3

4

5

6

7

8

9

10

11

Cash 98 00

Sales Discounts 2 00


Received cash on account

Sales Discounts On The Income Statement

SalesLess: Sales returns and allowances

Sales discounts

$38,500$200

140 340

Sales Discounts On The Income Statement

SalesLess: Sales returns and allowances

Sales discounts

Net Sales

$38,500$200

140 340

$38,160

3

Describe and use the

accounts receivable

ledger.

Posting To The General Ledger

• In the general ledger account:

� Step 1: Enter the date.

� Step 2: Enter the amount of the transaction.

� Step 3: Enter the new balance.

� Step 4: Enter the journal page number.

• In the journal:

• Step 5: Enter the ledger account number in the PR

column.

Accounts Receivable Ledger

• A separate “subsidiary” ledger

• Contains an individual accounts receivable account for each customer

• Often numbered

• Filed either alphabetically or numerically

• A summary accounts receivable account maintained in the general ledger is the controlling account

Posting To The Accounts

Receivable Ledger

• In the accounts receivable ledger account:

� Step 1: Enter the date.

� Step 2: Enter the amount of the transaction.

� 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.

Posting Sales To The General Journal


1

2

3

4

5

6

7

8

9

10

11

Accts. Receivable/E. Lorenzo 1,596 00

Sales 1,520 00


Sale No. 133C

Apr. 420--



1

2

3

4

5

6

7

8

9

10

11


Sales 1,520 00


Sale No. 133C

Apr.420--

Posting Sales To The General Ledger

Account: Account No.

DATE ITEM PR DR. CR.BALANCE

DR. CR.

ACCOUNTS RECEIVABLE 122

20--

Apr. 1

1,596

12,000

4

Balance

13,596J8



1

2

3

4

5

6

7

8

9

10

11


Sales 1,520 00


Sale No. 133C

Apr. 4 12220--



1

2

3

4

5

6

7

8

9

10

11


Sales 1,520 00


Sale No. 133C

Apr. 4 12220--

Posting Sales To The Accounts Receivable Ledger

Name:

DATE ITEM PR DEBIT CREDIT BALANCE

Enrico Lorenzo

20--

Apr. 1,5964

Address: 5240 Tousley Court, Indianapolis, IN 46224-5678

1,596J8



1

2

3

4

5

6

7

8

9

10

11


Sales 1,520 00


Sale No. 133C

Apr. 4 122 /��20--



1

2

3

4

5

6

7

8

9

10

11


Sales 1,520 00


Sale No. 133C

Apr. 4 122 /��

401

231

20--

Accounting For Sales Returns And

Allowances—General JournalDATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11



Accts. Rec./S. Chang 42 00

Returned merchandise—

May 5

Credit Memo #72

20--



1

2

3

4

5

6

7

8

9

10

11





May 5

Credit Memo #72

401.120--




1

2

3

4

5

6

7

8

9

10

11




May 5

Credit Memo #72

401.1

231

20--



1

2

3

4

5

6

7

8

9

10

11





May 5

Credit Memo #72

401.1

231

122/��

20--

Posting Cash Receipts To The General

JournalDATE DESCRIPTION PR DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

Cash 1,596 00

Accts. Rec./E. Lorenzo


Apr.14

1,596 00

20--

Posting Cash Receipts To The General


1

2

3

4

5

6

7

8

9

10

11

Cash 1,596 00



Apr.14

1,596 00

10120--

Posting Cash Reciepts To The General


1

2

3

4

5

6

7

8

9

10

11

Cash 1,596 00



Apr. 14

1,596 00

101

122/��

20--

Bank Credit Card Sales

• Are 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

• The credit card company makes the electronic deposit to the merchandiser’s bank account for the gross amount of credit card sales less a processing fee

Bank Credit Card Sale Journal Entry


1

2

3

4

5

6

7

8

9

10

11

Cash 100 80May 6



1

2

3

4

5

6

7

8

9

10

11

Cash 100 80

Bank Credit Card Expense 4 20

May 6



1

2

3

4

5

6

7

8

9

10

11

Cash 100 80

Bank Credit Card Expense 4 20

Sales 100 00

May 6

Made credit card sale


4

Prepare a schedule of

accounts receivable.

Schedule Of Accounts Receivable

• Prepared to verify that the sum of the accounts receivable ledger balances equals the Accounts Receivable balance

• Is an alphabetical listing of customer accounts and their balances

• Usually prepared at the end of the month

• The total calculated in the schedule is compared with the balance in Accounts Receivable in the general ledger

Northern MicroSchedule Of Accounts Receivable

April 30, 20--

$ 2,302Helen Avery

Susan Chang

Heidi Schwitzer

Ken Ulmet

Vivian Winston

651

3,563

3,315

4,500$14,331

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 Accounts Receivable in

the general ledger.

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