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Chapter 10: Journalizing Sales and Cash Receipts Using Special Journals. 10-1: Journalizing Sales on Account Using a Sales Journal. Customer: person or business to whom merchandise or services are sold Individuals, schools, churches, etc. Sales tax: tax on sale of merchandise or services

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10 1 journalizing sales on account using a sales journal
10-1: Journalizing Sales on Account Using a Sales Journal
  • Customer: person or business to whom merchandise or services are sold
    • Individuals, schools, churches, etc.
  • Sales tax: tax on sale of merchandise or services
    • Rates usually stated as percentage of sales
    • Amount of sales tax collected is a business liability until paid to the government agency
10 1 journalizing sales on account using a sales journal1
10-1: Journalizing Sales on Account Using a Sales Journal
  • Sale of merchandise may be on account or for cash
    • Increases revenue of business
    • Regardless of when payment is made, revenue should be recorded at time of sale, not date cash is received
      • Accounting concept Realization of Revenue
  • Sale on account: Sale for which cash will be received at a later date
    • Also known as charge sale
    • Total due from all charge customers in general ledger account titled Accounts Receivable
10 1 journalizing sales on account using a sales journal2
10-1: Journalizing Sales on Account Using a Sales Journal
  • Sales journal: special journal used to record only sales of merchandise on account
  • Special amount columns in this sales journal are:
    • Accounts Receivable Debit
    • Sales Credit
    • Sales Tax Payable Credit
  • When merchandise is sold on account, seller prepares form showing what has been sold, known as a sales invoice
    • Includes goods or services sold, quantity, and price
    • Also known as sales ticket or sales slip
    • Same invoice is considered by customer to be purchase invoice
10 1 journalizing sales on account using a sales journal3
10-1: Journalizing Sales on Account Using a Sales Journal
  • Three copies of sales invoice prepared
    • Copy given to customer
    • Copy given to shipping department of selling company
    • Copy used a source document for sale
  • Sale recorded at time sale is made
  • Accounts Receivable has normal debit balance
    • Debited for total of sales and sales tax to show increase
  • Sales has normal credit balance
    • Credited for price of goods to show increase in revenue account
  • Sales tax payable has normal credit balance
    • Credited for amount of sales ta to show increase in this liability account
the sales journal
The Sales Journal
  • For sales on account
  • Source document: Sales Invoice
  • Total Sales Invoice amount = Sales + Sales Tax

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.

practice
PRACTICE:
  • 10-1 WT – Textbook page 274, WP page 225
  • 10-1 OYO – Textbook p. 274, WP page 226
10 2 journalizing cash receipts using a cash receipts journal
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Cash sale: Sale in which cash is received for total amount of sale at time of transaction
  • Credit care sale: sale in which credit card used for total amount of sale at time of transaction
    • VISA, MasterCard, and Discover Card
    • Customer who uses credit car promises to pay amount due for credit card to bank issuing the credit card
10 2 journalizing cash receipts using a cash receipts journal1
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Cash register prints summary of sales recorded at end of each day
    • used for journalizing sales transaction, but can’t provide business with information about what merchandise was sold and when, or to which customers
    • Point-of-sale (POS) terminal: computer used to collect, store, and report all information of sales transaction
  • When processing sale, sales clerk uses scanning device to scan universal product code (UPC) symbol on item
  • POS terminal matches number represented by UPC symbol with merchandise number to obtain description and price of merchandise
10 2 journalizing cash receipts using a cash receipts journal2
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Terminal summary: Report summarizing cash and credit card sales of point-of-sale terminal
    • Used as source document for recording sales in journals
  • POS can provide following information:
    • Report sales by sales clerk
    • Report of sales by time of day
    • Report of merchandise having quantity on hand below a predetermined order
    • Page 277
10 2 journalizing cash receipts using a cash receipts journal3
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Batch report: report of credit card sales produced by point-of-sale terminal
    • can show each credit card sale or provide summary of number and total sales by credit card type
    • Batching out: process of preparing batch report of credit card sales from point-of-sale terminal
    • bank combines batch reports of customers and submits to nearest Federal Reserve Bank
      • Funds transferred among banks issuing credit cards, similar to way checks are transferred between banks
10 2 journalizing cash receipts using a cash receipts journal4
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Sales discount: cash discount on sales taken by customer and offered by seller to encourage early payment
    • Customer pays less than invoice amount previously recorded in sales account
    • Reduces amount of cash seller receives on sales on account
    • Special column titled “Sales Discount Debit”
      • Debit because this takes away from sales, which has a normal credit balance
10 2 journalizing cash receipts using a cash receipts journal5
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Total of terminal summary recorded as single cash sales transaction
  • POS terminal assigns summary a sequential number and used as source document (Objective Evidence)
  • Cash has normal debit balance
    • Debited for total sales and sales tax to show increase in asset account
  • Sales has normal credit balance
    • Credited for total price of all goods sold to show increase in revenue account
  • Sales tax payable has normal credit balance
    • Credited for total sales tax to show increase in liability account
  • Check mark in Acct. Title and Post Ref. Column
the cash receipts journal cash and credit card sales
The Cash Receipts Journal: Cash and Credit Card Sales
  • For cash and credit card sales
  • Source document: Terminal Summary (TS)
  • Total Cash = Sales + Sales Tax Payable

Page 279

November 4. Recorded cash and credit card sales, $5460.00, plus sales tax, $327.60; total, $5787.60. Terminal Summary 34.

practice1
PRACTICE:
  • 10-2 WT - Textbook page 284, WP page 227
    • Oct. 13th transaction
10 2 journalizing cash receipts using a cash receipts journal6
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Cash receipt on account transaction decreases future amounts to be collected from customer
    • Increases cash account balance and decreases accounts receivable account balance
  • Cash has normal debit balance
    • Debited for amount of cash received to show increase in asset account
  • Accounts receivable account has normal debit balance
    • Credited to show decrease in asset account
the cash receipts journal cash receipts on account
The Cash Receipts Journal: Cash Receipts on Account
  • For cash received to pay an accounts receivable
      • The sale has already been recorded on the Sales Journal
  • Source document: Receipt (R)
  • Total Cash = Sales + Sales Tax Payable

Page 280

November 6. Received cash on account from Country Crafters, $2162.40, covering S69. Receipt No. 90

practice2
PRACTICE:
  • 10-2 WT - Textbook p. 284, WP page 227
    • Oct. 4th transaction
10 2 journalizing cash receipts using a cash receipts journal7
10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
  • Deduction vendor allows on invoice amount to encourage prompt payment is known as cash discount
    • Cash discount on sales is a sales discount
    • Customer pays less in cash than invoice amount says and was previously recorded in sales account
  • “2/10, n/30”
    • Customer gets 2% discount when they pay amount owed within 10 days
    • Otherwise, net amount is due in 30 days
  • Sales Discount account provides business managers with more information to evaluate whether sales discount is cost-effective method of encouraging early payments of sales on account
the cash receipts journal cash receipts on account with sales disc t
The Cash Receipts Journal: Cash Receipts on Account with Sales Disc’t
  • For cash received to pay an accounts receivable
      • The sale has already been recorded on the Sales Journal
      • A discount has been given to encourage payment
  • Source document: Receipt (R)
  • Total Cash = Accounts Receivable – Sales Disct

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% discount, $24.00. Receipt No. 91.

practice3
PRACTICE:
  • 10-2 WT - Txtbk p. 284, WP p. 227
    • Oct. 30thtransaction
  • 10-2 OYO!!