lesson 10-1 journalizing sales on account using a...

CENTURY 21 ACCOUNTING © Thomson/South-Western

LESSON 10-1

Journalizing Sales on

Account Using a Sales

Journal

(to record transactions

related to sales)


Sales Tax

Purchases and sales of merchandise are the two

major activities of a merchandising business

Customer—a person or business to whom

merchandise or services are sold

Laws of most states and some cities require that a

tax be collected from customers for each sale made

Sales Tax—a tax on a sale of merchandise or

services

Sales Tax rates are usually stated as a percentage (%) of

sales

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LESSON 10-1


Sales Tax

Businesses must file reports with the proper government unit

and pay the amount of sales tax collected

Every business collecting a sales tax needs accurate records

of the amount of:

1. Total sales

2. Total sales tax collected

The amount of sales tax collected is a business liability until

paid to the government agency

The sales tax amount is recorded in a separate liability

account titled Sales Tax Payable, which has a normal credit

balance

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LESSON 10-1


4

LESSON 10-1

SALES TAX page 270


SALES OF MERCHANDISE ON ACCOUNT

A sale of merchandise on account may be (1) on

account or (2) for cash

A sale of merchandise increases the revenue of a

business

Regardless of when payment is made, the revenue

should be recorded at the time of a sale, not on the

date cash is received (CONCEPT: Realization of Revenue)

A sale for which cash will be received at a later date

is known as a sale on account (also referred to as a

“charge sale”)

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LESSON 10-1


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LESSON 10-1

SALES OF MERCHANDISE ON ACCOUNT page 271

Hobby Shack summarizes the total due from all charge

customers in a general ledger account title “Accounts

Receivable”

Accounts Receivable is an “Asset” account with a Debit Normal

Balance


SALES JOURNAL

A special journal used to record only “Sales” of

merchandise on account

The special amount columns in this sales journal are:

Accounts Receivable Debit

Sales Credit

Sales Tax Payable Credit

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LESSON 10-1


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LESSON 10-1

SALES JOURNAL page 272


SALES INVOICE

When merchandise is sold on account, the seller prepares a

form showing what has been sold

Sales Invoice—a form describing the goods or services

sold, the quantity, and the price

A sales invoice is used as a source document for recording a

sale on account (CONCEPT: Objective Evidence)

Also referred to as a “sales ticket” or a “sales slip”

The seller considers an invoice for a sale on account to be a

sales invoice

The same invoice is considered by the customer to be a

purchase invoice

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LESSON 10-1


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LESSON 10-1

SALES INVOICE page 272

Hobby Shack operates in a state with a 6% (.06) sales tax rate.


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LESSON 10-1

SALE ON ACCOUNT (Hobby Shack sells on account only

to businesses. Other customers must either pay cash or use a credit

card.) page 273

November 3. Sold merchandise on account to Village Crafts, $540.00,

plus sales tax, $32.40; total, $572.40. Sales Invoice No. 76.

540.00 x .06 = 32.40

540.00 + 32.40 = 572.40

Accounts Receivable – Debit Normal Bal.

Sales – Credit Normal Bal.

Sales Tax Payable – Credit Normal Bal.


TOTALING, PROVING, AND RULING A

SALES JOURNAL

At the end of each month, Hobby Shack totals,

proves, and rules its sales journal

The procedures for proving and ruling a sales journal

are the same as the procedures for cash payments

journal in Chapter 9

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LESSON 10-1

Col.

No. Column Title

Debit

Totals

Credit

Totals

1 Accounts Receivable Debit $9,068.06

2 Sales Credit $8,723.00

3 Sales Taxable Payable Credit 345.06

Totals $9,068.06 $9,068.06


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LESSON 10-1


SALES JOURNAL page 274


LESSON 10-2

Journalizing Cash

Receipts Using a Cash

Receipts Journal


PROCESSING SALES TRANSACTIONS

Hobby Shack sells most if its merchandise for cash

Cash Sale—a sale in which cash is received for the total

amount of the sale at the time of the transaction

Hobby Shack also sells merchandise to customers

who have a bank-approved credit card

Credit Card Sale—a sale in which a credit card is used for

the total amount of the sale at the time of the transaction

(VISA, MasterCard, Discover Card)

A customer who uses a credit card promises to pay the

amount due for the credit card transaction to the bank

issuing the credit card

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LESSON 10-2


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LESSON 10-2

PROCESSING SALES TRANSACTIONS page 277

UPC (Universal

Product Code)

Cash Register

Receipt

Point-of-Sale (POS)

Terminal Receipt

(continued on next slide)

Traditional

cash register Modern version of a

cash register

Matches the number

represented by the UPC

symbol with the

merchandise number to

obtain the description and

price


Periodically, Hobby Shack instructs the point-of-sale terminal

to print a report of all cash and credit card sales

Terminal Summary—the report that summarizes the cash

and credit card sales of a point-of-sale terminal

Hobby Shack uses the terminal summary as the source

document for recording sales in its journals (CONCEPT:

Objective Evidence)

Batch Report—a report of credit card sales produced by a

point-of-sale terminal

The process of preparing a batch report is called “batching out”

Electronically sent to the bank to process the credit card sales

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LESSON 10-2

PROCESSING SALES TRANSACTIONS


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LESSON 10-2

PROCESSING SALES TRANSACTIONS page 277

Terminal Summary

Batch Report

(continued from previous slide)


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LESSON 10-2

CASH RECEIPTS JOURNAL page 278

A special journal used for recording only cash receipts

Only those columns needed to record cash receipt transactions are

included

To encourage early payment, Hobby Shack allows customers who

purchase merchandise on account to take a deduction from the

invoice amount (Sales Discount)

Because of these special columns, most of Hobby Shack’s cash

receipt transactions can be recorded on one line


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LESSON 10-2

CASH AND CREDIT CARD SALES page 279

November 4. Recorded cash and credit card sales, $5,460.00, plus

sales tax, $327.60; total, $5,787.60. Terminal Summary 34.

12

34

5 6

1. Write the date.

2. Place a check mark in the Account Title column.

3. Write the terminal summary document number.

4. Place a check mark in the Post. Ref. column.

5. Write the sales amount.

6. Write the sales tax amount.

7. Write the cash amount.

7


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LESSON 10-2

CASH RECEIPTS ON ACCOUNT page 280

November 6. Received cash on account from Country Crafters,

$2,162.40, covering S69. Receipt No. 90.

1 2 3 4 5

1. Write the date.

2. Write the customer’s name.

3. Write the receipt number.

4. Write the credit amount.

5. Write the debit amount.


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LESSON 10-2

JOURNALIZING CASH RECEIPTS ON

ACCOUNT WITH SALES DISCOUNTS page 282

November 7. Received cash on account from Cumberland Center,

$1,176.00, covering Sales Invoice No. 74 for $1,200.00, less 2% (.02)

discount, $24.00. Receipt No. 91.

1 2 3 4 5 6

4. Write the original invoice amount.1. Write the date.

2. Write the customer’s name.

3. Write the receipt number.

5. Write the amount of sales discount.

6. Write the debit to cash.


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LESSON 10-2


CASH RECEIPTS JOURNAL page 283

See page 283 for proving cash table.


LESSON 10-3

Recording Transactions

Using a General Journal


SALES RETURNS AND ALLOWANCES

Sales Return—credit allowed a customer for the sales price

of returned merchandise, resulting in a decrease in the

vendor’s accounts receivable

Sales Allowance—credit allowed a customer for part of the

sales price of merchandise that is not returned, resulting in a

decrease in the vendor’s accounts receivable

Credit Memorandum—a form prepared by the vendor

showing the amount deducted for returns and allowances

Sales return and sales allowances decrease the amount of

sales

Sales Returns and Allowances account has a Debit Normal Balance

It is a “Contra Account” to Sales, which has a Credit Normal Balance

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LESSON 10-3


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LESSON 10-3

CREDIT MEMORANDUM FOR SALES

RETURNS AND ALLOWANCES page 285


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LESSON 10-3

JOURNALIZING SALES RETURNS AND

ALLOWANCES page 286

March 11. Granted credit to Village Crafts for merchandise returned, $58.50,

plus sales tax, $3.51, from S160; total, $62.01. Credit Memorandum No. 41.

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