Chapter 9
Sales and Cash Receipts
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Learning Objective 1
Recording and posting sales transactions
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LO-1
Retailers
Buy products such as toys, apparel, games,
bikes, and other items from
manufacturers and wholesalers
 Resell the goods to customers

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LO-1
Gross Sales
Total of cash and charge sales
 If cash sales were $1,000 and charge sales
were $2,000, credit the Sales account
$3,000

Accounts
Receivable
Cash
Dr.
Cr.
1,000
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Dr.
2,000
Cr.
Sales (Gross)
Dr.
Cr.
3,000
LO-1
Sales
Amount earned from sale of merchandise
inventory
 Revenue account
 Credit balance
 Reported on income statement

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LO-1
Sales Invoice
Invoice No.
94830
Terrance Home Improvement Store
INVOICE
Customer
Misc
Name
Address
City
Phone
Date
Order No.
Rep
FOB
Qty
1
6
Jerome Walther
P.O. Box 291
Edgewood
410-555-3041
State MD
ZIP 21034
Description
Steel French Patio Door
Double-Hung Windows
Credit Terms: 2/10, n/30
Unit Price
TOTAL
$328 $
328.00
$
152 $
912.00
SubTotal
Shipping
$ 1,240.00
TOTAL
$ 1,240.00
Tax Rate(s)
Record the sale
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10/20/X5
PO1234
MMK
shipping point
LO-1
Sales
Accounts Receivable
1,240
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Sales
1,240
LO-1
Sales Returns and Allowances
Contra-revenue account
 Reported on income statement
 Given when a customer returns a product or is
given a price reduction
 If charge customer Smith returns a product
valued at $50 on June 10th, the following would
occur

Sales Returns
& Allowances
Dr.
50
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Cr.
Accounts
Receivable (Smith)
Dr.
Cr.
50
LO-1
Sales Returns and Allowances
General Journal
Page 1
Date
Jun
Account Titles and Description PR
10 Sales Returns and Allowances
Dr.
Cr.
50
Accounts Receivable, Smith
50
Issued credit memorandum
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LO-1
Sales Discounts
Contra-revenue account
 Given to customers who pay early
 2/10, n/30 - 2% discount given to
customers who pay within first 10 days,
full amount due in 30 days
 n/10, EOM- no discount is given, full
amount of bill is due within 10 days after
the end of the month
 Reported on income statement
LO-1

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Sales Discounts
Assume that Jerome Walther pays Terrance
Home Improvement Store within 10 days
with terms of 2/10, n/30. Sale was in the
amount of $936. Prepare the journal
entry.
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Sales Discounts
Sales discount = $936 X .02
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Sales Discounts
Discount period - time when a discount is
granted (less than credit period)
 Credit period - length of time allowed to
pay back the bill
 If customer Smith has a $100 invoice with
terms of 2/10, n/30, he would be allowed
a $2 discount (100 * .02)

Sales Discount
Dr.
2
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Cr.
LO-1
Sales Discounts
General Journal
Page 1
Date
Jun
Account Titles and Description
30 Cash
Sales Discount
PR
Dr.
Cr.
98
2
Accounts Receivable, Smith
100
Payment from sale on
account
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Sales Tax Payable
Liability account
 Stores must collect tax from customers
and send it to the state
 Recorded in Sales Tax Payable account

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LO-1

Sales Tax Payable
Assume a $1,000 cash sale was made along with
a $2,000 credit sale at a 6% tax rate
◦ $1,000 * .06 = $60 ($1,000 + $60= $1,060)
Cash
◦ $2,000 * .06 = $120 ($2,000 + $120 =$2,120)
Accounts Receivable
Accounts
Receivable
Cash
Dr.
1,060
Cr.
Dr.
2,120
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Cr.
Sales Tax
Payable
Dr.
Cr.
Sales
Dr.
180
Cr.
3,000
LO-1
Sales Tax Payable
Invoice No.
94830
Terrance Home Improvement Store
INVOICE
Customer
Misc
Name
Address
City
Phone
Date
Order No.
Rep
FOB
Qty
1
6
Jerome Walther
P.O. Box 291
Edgewood
410-555-3041
State MD
ZIP 21034
Description
Steel French Patio Door
Double-Hung Windows
Credit Terms: 2/10, n/30
Unit Price
TOTAL
$328 $
328.00
$ 152.00 $
912.00
Tax Rate(s)
Sales tax = $1,240 x 5% = $62.00
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10/20/X5
PO1234
MMK
shipping point
SubTotal
Shipping
5.00%
$
1,240.00
$
62.00
TOTAL
$
1,302.00
LO-1
Sales Tax Payable
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LO-1
Learning Objective 2
Preparing, journalizing, and posting a credit
memorandum
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Credit Memorandum
Paper sent by the seller to a customer
who has returned merchandise
 Indicates to the customer that the seller
is reducing the amount owed by the
customer

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LO-2
Credit Memorandum
Credit Memo #236
Terrance Home Improvement Store
Credit Memo
Credit to
Name
Address
City
Phone
Jerome Walther
P.O. Box 291
Edgewood
410-555-3041
Date
State MD
10/22/X5
ZIP 21034
We credit your account as follows:
Qty
Description
2
Double-Hung Windows
Unit Price
TOTAL
$ 152.00 $
304.00
SubTotal
$
304.00
TOTAL
$
304.00
Tax Rate(s)
Record the Return
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LO-2
Sales Returns and Allowances
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LO-2
Sales Returns & Allowances
Accounts Receivable
1,240
304
Sales
1,240
Bal. 936
Sales Returns & Allowances
304
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LO-2
Sales Returns & Allowances
Cash
917.28
Sales
1,240
Bal. 917.28
Sales Returns & Allowances
304
Sales Discounts
18.72
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LO-2
Compute Net Sales
Sales
Less Sales Discounts
Sales Returns & Allowances
Net Sales
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$1,240.00
18.72
304.00
$917.28
LO-2
Learning Objective 3
Recording and posting cash receipts
transactions
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LO-3
Cash Receipts Transactions
Are recorded in general journal and then
posted to general ledger
 Charge customer transactions are
recorded in the accounts receivable
ledger

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LO-3
Sample Cash Receipts Transactions
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LO-3
Sample Cash Receipts Transactions
Partial General Ledger
Cash 111
Dr.
Cr.
6/1 GJ 1 5,000
6/3 GJ 1
T. Samolis, Capital 311
Dr.
Cr.
6/1GJ 1 5,000
980
6/5 GJ 1 2,000
5,000
7,980
6/3 GJ 1
Dr.
Cr.
6/3 GJ 1 1,000
Sales Discount 413
Dr.
Accounts
Receivable 113
Cr.
20
Sales 411
Dr.
1,000
Cr.
6/3 GJ 1 1,000
6/5 GJ 1 2,000
20
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3,000
LO-3
Learning Objective 4
Recording to the accounts receivable
subsidiary ledger
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Subsidiary Ledger
Ledger that contains accounts of a single
type
 Open an account for each customer
 Often used for credit customers
 Arranged alphabetically

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LO-4
Accounts Receivable
Controlling Account
Accounts Receivable
1,240
1,240
3,500
800
Bal. 4,300
Subsidiary Accounts
Q. Adams
3,500
B. Merideth
Bal. 4,300
800
J. Walther
1,240
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1,240
LO-4
Learning Objective 5
Preparing a schedule of accounts receivable
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LO-5
Schedule of Accounts Receivable
Terrance Home Improvement Store
Schedule of Accounts Receivable
October 31, 20xx
Q. Adams
$3,500
B. Merideth
800
Total Accounts Receivable
$4,300
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LO-5
Put it all together
We’ll use Problem 9B-3 to put these
concepts together
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LO1,2,3,4,5
Problem 9B-3
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Page 1
LO1,2,3,4,5
Problem 9B-3
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Page 2
LO1,2,3,4,5
Problem 9B-3
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Page 3
LO1,2,3,4,5
Problem 9B-3
Page 4
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LO1,2,3,4,5
Problem 9B-3
Page5
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LO1,2,3,4,5
Accounts Receivable Subsidiary
Ledger (Problem 9B-3)
(Beginning Account balances provided)
B. Dale
Bal. 400 2,000
2,000
Bal. 400
R. Lester
Bal. 800 900
900 800
6,000
Bal. 6,000
P. Pry
Bal. 600
4,000
500
3,500
Bal. 600
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J. Zon
Bal. 400
600
Bal. 1,000
LO1,2,3,4,5
Schedule of Accounts Receivable
(Problem 9B-3)
Peaker’s Sneaker Shop
Schedule of Accounts Receivable
May 31, 20XX
B. Dale
$400
R. Lester
6,000
P. Pry
600
J. Zon
1,000
Total Accounts Receivable
$8,000
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Practical Approach, 11e by Slater
LO1,2,3,4,5
End of Chapter 9
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Publishing, College Accounting: A
Practical Approach, 11e by Slater