Heintz & Parry
Chapter
20th Edition
10
College
Accounting
Accounting for Sales
and Cash Receipts
Merchandising Business
1
•
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
Describe merchandise
sales transactions.
Retailer
•
Wholesaler
•
•
Sells to final consumers
– Evidenced by:
Purchases merchandise from the manufacturer
Sells to retailers
Cash register tape
Sales ticket
One copy of the sales
ticket is given to the
customer and the
other copy is sent to
accounting
•
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
•
2
Issued by the seller indicating the customer’s
accounts receivable account has been credited for
the amount of a:
o
Describe and use
merchandise sales
accounts.
Return
Merchandise returned for a refund
Allowance
o
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
Merchandise Sales Accounts
SALES
Sales Account
A REVENUE account used to record sales of
merchandise.
SALES TAX PAYABLE
SALES
DR.
CR.
–
+
SALES RETURNS
AND ALLOWANCES SALES DISCOUNTS
Cash Sale Journal Entry
DATE
1
2
3
4
DESCRIPTION
Cash
Sales
Made cash sale
Cash Sale Journal Entry
PR DEBIT CREDIT
100 00
100 00
DATE
1
2
3
4
5
5
6
6
7
7
8
9
8
9
10
11
10
11
DESCRIPTION
Cash
Sales
Made cash sale
PR DEBIT CREDIT
100 00
100 00
Credit Sale Journal Entry
DATE
1
2
3
4
DESCRIPTION
Accts. Receivable/Customer
Credit Sale Journal Entry
PR DEBIT CREDIT
100 00
DATE
1
2
3
4
5
5
6
6
7
7
8
9
8
9
10
11
10
11
Credit Sale Journal Entry
DATE
1
2
3
DESCRIPTION
Accts. Receivable/Customer
DESCRIPTION
Accts. Receivable/Customer
PR DEBIT CREDIT
100 00
Sales Tax Payable Account
A LIABILITY account used to record the taxes
imposed on sales and owed to the taxing
authority.
PR DEBIT CREDIT
100 00
Sales
100 00
Made credit sale
SALES TAX PAYABLE
4
5
DR.
CR.
–
+
6
7
8
9
10
11
Cash Sale Journal Entry
Sales Tax Payable Account
A LIABILITY account used to record the taxes
imposed on sales and owed to the taxing
authority.
SALES TAX PAYABLE
DR.
CR.
–
+
DATE
1
2
3
4
5
6
7
8
9
10
11
DESCRIPTION
PR DEBIT CREDIT
Cash Sale Journal Entry
DATE
DESCRIPTION
PR DEBIT CREDIT
105 00
Cash
1
2
3
4
Cash Sale Journal Entry
DATE
5
5
6
6
7
7
8
9
8
9
10
11
10
11
Cash Sale Journal Entry
DATE
1
2
3
4
DESCRIPTION
PR DEBIT CREDIT
105 00
Sales
100 00
Credit Sale Journal Entry
PR DEBIT CREDIT
105 00
Cash
DESCRIPTION
Cash
1
2
3
4
Sales
100 00
Sales Tax Payable
Made cash sale
5 00
DATE
1
2
3
5
6
6
7
7
8
9
8
9
10
10
11
11
Sales Returns And Allowances Account
A CONTRA-REVENUE account used to record
sales returns and sales allowances. Shown as a
deduction from Sales on the income statement.
SALES RETURNS
AND ALLOWANCES
PR DEBIT CREDIT
105 00
Sales
100 00
Sales Tax Payable
Made cash sale
4
5
DESCRIPTION
Accts. Receivable/Customer
5 00
Sales Return Journal Entry
DATE
1
2
3
4
DR.
CR.
5
+
–
6
7
8
9
10
11
DESCRIPTION
PR DEBIT CREDIT
Example:
A credit customer, Susan Chang,
returns printer cartridges
(selling price $40 + $2 sales tax).
Sales Return Journal Entry
DATE
1
2
3
4
Sales Return Journal Entry
DESCRIPTION
PR DEBIT CREDIT
Sales Returns and Allowances
40 00
DATE
1
2
3
4
5
5
6
6
7
7
8
9
8
9
10
11
10
11
Sales Return Journal Entry
DATE
1
2
3
4
5
Accts. Receivable/S. Chang
Issued credit memo for
returned merchandise
2 00
Sales Tax Payable
Sales Discounts Account
DESCRIPTION
PR DEBIT CREDIT
40 00
Sales Returns and Allowances
Sales Tax Payable
DESCRIPTION
PR DEBIT CREDIT
Sales Returns and Allowances
40 00
2 00
42 00
A CONTRA-REVENUE account used to record
discounts given to customers who buy
merchandise on account to encourage prompt
payment.
SALES DISCOUNTS
6
DR.
CR.
+
–
7
8
9
10
11
Credit Terms
Credit Terms
2/10, n/30
2/10, n/30
Credit Terms
Credit Terms
2/10, n/30
2/10, n/30
Credit Terms
Credit Terms
1/10, n/30
2/eom, n/60
Sales Discounts Journal Entry
Credit Terms
DATE
3/10 eom, n/60
1
2
3
4
5
6
7
8
9
10
11
DESCRIPTION
PR DEBIT CREDIT
Sales Discounts Journal Entry
DATE
1
2
3
4
DESCRIPTION
Accts. Receivable/Customer
Sales Discounts Journal Entry
PR DEBIT CREDIT
100 00
100 00
Sales
Made sale on account
DATE
5
5
6
6
7
7
8
9
8
9
10
11
10
11
Sales Discounts Journal Entry
DATE
1
2
3
DESCRIPTION
Cash
Sales Discounts
PR DEBIT CREDIT
98 00
2 00
Sales Discounts
Sales Discounts On The Income Statement
PR DEBIT CREDIT
98 00
Sales
$38,500
Less: Sales returns and allowances
Sales discounts
$200
140
2 00
Accts. Receivable/Customer
Received cash on account
4
DESCRIPTION
Cash
1
2
3
4
100 00
5
6
7
8
9
10
11
Sales Discounts On The Income Statement
Sales
Less: Sales returns and allowances
Sales discounts
Net Sales
$38,500
$200
140
340
$38,160
3
Describe and use the
accounts receivable
ledger.
340
Posting To The General Ledger
•
Accounts Receivable Ledger
In the general ledger account:
•
Step 1:
Step 2:
Step 3:
Step 4:
•
•
Enter the date.
Enter the amount of the transaction.
Enter the new balance.
Enter the journal page number.
•
•
•
In the journal:
•
Step 5: Enter the ledger account number in the PR
column.
Posting To The Accounts
Receivable Ledger
•
•
Posting Sales To The General Journal
In the accounts receivable ledger account:
Step 1:
Step 2:
Step 3:
Step 4:
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
Enter the date.
Enter the amount of the transaction.
Enter the new balance.
Enter the journal page number.
1
2
3
In the journal:
4
5
Step 5: Enter a slash (/) followed by a check mark ()
in the PR column.
DATE
DESCRIPTION
20-Apr. 4 Accts. Receivable/E. Lorenzo
Sales
PR
DEBIT CREDIT
1,596 00
1,520 00
Sales Tax Payable
76 00
Sale No. 133C
6
7
8
9
10
11
Posting Sales To The General Journal
1
2
3
4
5
6
7
8
9
10
11
DATE
DESCRIPTION
20-Apr.4 Accts. Receivable/E. Lorenzo
Sales
Sales Tax Payable
Sale No. 133C
PR
DEBIT CREDIT
1,596 00
Posting Sales To The General Ledger
Account:
76 00
DATE
20-Apr. 1
4
Account No. 122
BALANCE
CR.
DR.
CR.
ACCOUNTS RECEIVABLE
1,520 00
ITEM
PR
DR.
Balance
J8 1,596
12,000
13,596
Posting Sales To The General Journal
1
2
3
4
DATE
DESCRIPTION
20-Apr. 4 Accts. Receivable/E. Lorenzo
Sales
PR
122
DEBIT CREDIT
1,596 00
Sales Tax Payable
1,520 00
76 00
Sale No. 133C
Posting Sales To The General Journal
1
2
3
4
5
5
6
6
7
7
8
9
8
9
10
11
10
11
Posting Sales To The Accounts Receivable
Ledger
Name: Enrico Lorenzo
DATE
20-Apr. 4
ITEM
PR DEBIT CREDIT
J8 1,596
PR
122
DEBIT CREDIT
1,596 00
1,520 00
Sales Tax Payable
76 00
Sale No. 133C
Posting Sales To The General Journal
BALANCE
1
2
3
1,596
4
Address: 5240 Tousley Court, Indianapolis, IN 46224-5678
DATE
DESCRIPTION
20-Apr. 4 Accts. Receivable/E. Lorenzo
Sales
DATE
DESCRIPTION
PR DEBIT CREDIT
20- 1,596 00
Apr. 4 Accts. Receivable/E. Lorenzo 122 /
Sales
1,520 00
Sales Tax Payable
76 00
Sale No. 133C
5
6
7
8
9
10
11
Accounting For Sales Returns And
Allowances—General Journal
Posting Sales To The General Journal
1
2
3
4
DATE
DESCRIPTION
PR DEBIT CREDIT
20- 1,596 00
Apr. 4 Accts. Receivable/E. Lorenzo 122 /
Sales
401
1,520 00
Sales Tax Payable
76 00
231
Sale No. 133C
1
2
3
4
5
5
6
6
7
7
8
9
8
9
10
11
10
11
DATE
DESCRIPTION
PR
20-May 5 Sales Returns and Allowances
Sales Tax Payable
Accts. Rec./S. Chang
Returned merchandise—
Credit Memo #72
DEBIT CREDIT
40 00
2 00
42 00
Accounting For Sales Returns And
Allowances—General Journal
1
2
3
4
5
Accounting For Sales Returns And
Allowances—General Journal
DATE
DESCRIPTION
PR DEBIT CREDIT
20-40 00
May 5 Sales Returns and Allowances 401.1
2 00
Sales Tax Payable
Accts. Rec./S. Chang
Returned merchandise—
42 00
1
2
3
4
5
Credit Memo #72
6
6
7
7
8
9
8
9
10
11
10
11
Accounting For Sales Returns And
Allowances—General Journal
1
2
3
4
5
DATE
DESCRIPTION
PR DEBIT CREDIT
20-40 00
May 5 Sales Returns and Allowances 401.1
Sales Tax Payable
231
2 00
122/
Accts. Rec./S. Chang
42 00
Returned merchandise—
Credit Memo #72
1
2
3
7
8
9
8
9
10
10
11
11
Posting Cash Receipts To The General
Journal
Received cash on account
DATE
DESCRIPTION
20-Apr.14 Cash
Accts. Rec./E. Lorenzo
PR
DEBIT CREDIT
1,596 00
1,596 00
Received cash on account
5
6
PR DEBIT CREDIT
101 1,596 00
1,596 00
42 00
4
7
DATE
DESCRIPTION
20-Apr.14 Cash
Accts. Rec./E. Lorenzo
Accts. Rec./S. Chang
Returned merchandise—
Credit Memo #72
Posting Cash Receipts To The General
Journal
6
1
2
3
4
DATE
DESCRIPTION
PR DEBIT CREDIT
20-40 00
May 5 Sales Returns and Allowances 401.1
Sales Tax Payable
2 00
231
Posting Cash Reciepts To The General
Journal
1
2
3
4
5
5
6
6
7
7
8
9
8
9
10
11
10
11
DATE
DESCRIPTION
20-Apr. 14 Cash
Accts. Rec./E. Lorenzo
Received cash on account
PR DEBIT CREDIT
101 1,596 00
1,596 00
122/
Bank Credit Card Sale Journal Entry
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
1
2
3
4
DATE
DESCRIPTION
May 6 Cash
PR
DEBIT CREDIT
100 80
5
6
7
8
9
10
11
Bank Credit Card Sale Journal Entry
1
2
3
DATE
DESCRIPTION
May 6 Cash
Bank Credit Card Expense
PR
DEBIT CREDIT
100 80
4 20
Bank Credit Card Sale Journal Entry
1
2
3
4
4
5
5
6
6
7
7
8
9
8
9
10
10
11
11
4
Prepare a schedule of
accounts receivable.
DATE
DESCRIPTION
May 6 Cash
Bank Credit Card Expense
Sales
PR
DEBIT CREDIT
100 80
4 20
100 00
Sales Tax Payable
Made credit card sale
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
5 00
Northern Micro
Schedule Of Accounts Receivable
April 30, 20-Helen Avery
Susan Chang
Heidi Schwitzer
Ken Ulmet
Vivian Winston
Errors
$ 2,302
651
3,563
3,315
4,500
$14,331
•
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.