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LO4 Explain the impact of sales discounts on the collection of accounts receivable.

LO5 Journalize and post departmental cash receipts using a cash receipts journal.

LESSON

2-2Journalizing and Posting Cash Receipts

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Cash Receipts on Account

● To encourage early payment, a business may grant a deduction on the invoice amount.

● A deduction that a vendor allows on the invoice amount to encourage prompt payment is known as a cash discount.

● A cash discount on a sale taken by the customer is called a sales discount.

SLIDE 2

Lesson 2-2

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LO4

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Sales Discount

SLIDE 3

• If a company sells on account using 2/10, n/30 terms, the 2/10 means that a 2% sales discount may be deducted if sales on account are paid within 10 days of the invoice date.

• All sales on account must be paid within 30 days of the invoice date, or n/30.

Lesson 2-2

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LO4

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Journalizing a Cash Receipt with a Sales Discount

SLIDE 4

LO5

Lesson 2-2

August 1. Received cash on account from Wilson Properties, $1,454.32, covering Sales Invoice No. 812 for outdoor furniture for $1,484.00 ($1,400.00 plus sales tax, $84.00), less 2% discount, $29.68. Receipt No. 842.

Receipt Number3Invoice amount4

Date

1

Customer

2

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Sales Discount

5

Cash Received

6

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Journalizing Cash and Credit Card Sales

SLIDE 5

LO5

Lesson 2-2

• When a company accepts cash or credit cards from its customers, they are recorded together in the cash receipts journal.• A specialized computer used to collect, store, and

report all the information about a sales transaction is called a point-of-sale (POS) terminal.• The report that summarizes the cash and credit card

sales of a point-of-sale terminal is called a terminal summary.

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© 2015 Cengage Learning. All Rights Reserved.

Journalizing and Posting a Cash Receipt with a Sales Discount

SLIDE 6

LO5

Lesson 2-2

August 5. Received cash on account from Taylor Apartments, $2,247.38, covering Sales Invoice No. 816 for $2,605.94 ($2,458.43 plus sales tax of 6.00%, $147.51), less Credit Memorandum No. 30 for $312.70 ($295.00 plus sales tax, $17.70), less 2% discount, $45.86. Receipt No. 844.

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To calculate the amount of cash received, (1) find the sales discount amount and (2) determine the amount of cash to be received.

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Posting from a Cash Receipts Journal

SLIDE 7

LO5

Lesson 2-2

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Date Journal Page Number Column Total Account Number

Account Balance

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Lesson 2-2 Audit Your Understanding

1. Why does a business offer cash discounts?

SLIDE 8

ANSWER

To encourage early payment.

Lesson 2-2

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© 2015 Cengage Learning. All Rights Reserved.

Lesson 2-2 Audit Your Understanding

2. What does 2/10, n/30 mean?

SLIDE 9

ANSWER

A 2% sales discount may be deducted if sales on account are paid within 10 days of the invoice date. All sales on account must be paid within 30 days of the invoice date.

Lesson 2-2

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© 2015 Cengage Learning. All Rights Reserved.

Lesson 2-2 Audit Your Understanding

3. What impact does a sales discount have on sales?

SLIDE 10

ANSWER

None. A sales discount only reduces the amount due from the customer.

Lesson 2-2

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© 2015 Cengage Learning. All Rights Reserved.

Lesson 2-2 Audit Your Understanding

4. Why are credit card sales and cash sales recorded together in the sales journal?

SLIDE 11

ANSWER

Both cash sales and credit card sales result in an immediate increase in the bank account balance.

Lesson 2-2

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© 2015 Cengage Learning. All Rights Reserved.

Lesson 2-2 Audit Your Understanding

5. How and when are entries in the Accounts Receivable Credit column posted?

SLIDE 12

ANSWERIndividual amounts in the Accounts ReceivableCredit column are posted in individual customeraccounts on the same date that the transaction isrecorded in the cash receipts journal. This procedure keeps the customer accounts up to date. The total of the Accounts Receivable column is posted to the controlling account in the general ledger at the end of the period.

Lesson 2-2

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