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Chapter 7: Accounting for Sales and Accounts Receivable
Chapter Opener: Thinking Critically
Students should recognize that a strong distribution system, like that of Wal-Mart, is important to retailers.
Wal-Mart’s system allows each store to customize its product mix to match the needs of the community.
Technology has been an important factor as well. Wal-Mart invented the practice of sharing sales data via
computer with major suppliers, such as Proctor & Gamble. As a result, Wal-Mart stores rarely run out of
stock of popular items.
Fast Facts
• The company employs more than 1.5 million associates worldwide through more than 3,600 facilities in
the United States and more than 1,570 overseas.
• More than 138 million customers per week visit Wal-Mart stores worldwide.
• Wal-Mart Stores, Inc. operates four different retail concepts: Wal-Mart discount stores, Supercenters
which combine discount with grocery stores, Neighborhood Markets which focus on groceries and
pharmaceuticals, and SAM’S CLUBS which are membership-only warehouse clubs.
• Wal-Mart stock was first offered for public sale in 1970. By 1971 it had its first stock split.
• As of March 31, 2005, the Company had 1,343 Wal-Mart stores, 1,730 Supercenters, 552 SAM’S CLUBS
and 86 Neighborhood Markets in the United States.
Computers in Accounting: Thinking Critically
Management might use key measurements like sales by geographic region or sales by product or time of
day to make merchandising, purchasing, or marketing decisions. Information on top selling products or slowmoving items might help managers tailor product assortments to particular regions.
Computers in Accounting: Internet Application
Answers will vary. Web Site = www.ftc.gov
Managerial Implications: Thinking Critically
A company which fails to maintain up-to-date accounts receivable records may face the following:
• Customer dissatisfaction: Businesses who extend credit to their customers risk customer dissatisfaction if
accounts are not updated frequently.
• Ineffective collection efforts: Effective accounts receivable collection efforts rely on accurate account
balances.
• Cash flow: Negative cash flow situations may stem from improper maintenance of accounts receivable
or from delayed accounts receivable billings.
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Discussion Questions
These questions are designed to check students’ understanding of the new terms, concepts, and procedures
presented in the chapter.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Retail: sell goods directly to consumers. Wholesale: sell goods to retailers.
Prove balances, summarize receivables.
Subtract balance of Sales Returns and Allowances from balance of Sales.
Separate record of returns and allowances.
Contra revenue account.
Compare totals of debit and credit columns.
Time of sale; Sales Tax Payable.
Divide total of Sales account by 105 percent, multiply by sales tax rate.
a. Debit Accounts Receivable, credit Sales, b. Debit Accounts Receivable from Credit Card Companies,
credit Sales.
Summaries of credit card sales submitted to the credit card company for payment.
The credit card company.
Fee charged by banks to retailers for the privilege of allowing their customers to use bank credit cards;
expense account.
No responsibility for collecting cash from customer exists.
Purchase amount to be paid at a later date.
A reduction from the list price, offered by wholesalers; attracts customers.
Exercises
Exercise 7.1
1. Sales Journal
2. General Journal
3. Cash Receipts Journal
4. Purchases Journal
5. General Journal
6. Cash Receipts Journal
7. Cash Receipts Journal
8. Cash Payments Journal
Exercise 7.2
Dr.
1. 111
2. 101
3. 451, 231
4. 101
5. 451, 231
6. 451, 231
Cr.
401, 231
111
111
401, 231
111
101
Exercise 7.3
SALES JOURNAL
Date
2007
May 1
2
3
Sales Slip
No.
Customer’s Name
1101
1102
1103
Roy Anderson . . . . . . . . . .
John Amos . . . . . . . . . . . .
Teresa Wells . . . . . . . . . . .
138 䡲 Chapter 7
Post.
Ref.
PAGE 18
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Sales
Credit
389
259
216
29
19
16
360
240
200
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Exercise 7.4
GENERAL JOURNAL
Date
2007
June 7
22
Description
PAGE 15
Post.
Ref.
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Deborah Westgate . . . . . . . . . .
Accepted a return of defective merchandise,
Credit Memo 301, original sale made on
Sales Slip 1610, May 31
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Brian Barnett . . . . . . . . . . . . . .
Gave an allowance for damaged merchandise,
Credit Memo 121, original sale made on
Sales Slip 1663, June 17
Debit
Credit
600
48
648
900
72
972
Exercise 7.5
1. The $6,480 debit is posted to Accounts Receivable (111). July 31 is entered in the Date column, S1 in
the Post. Ref. column, $6,480 in the Debit column, and the balance is increased by this amount.
2. The $480 credit is posted to Sales Tax Payable (231). July 31 is entered in the Date column, S1 in the
Post. Ref. column, $480 in the Credit column, and the balance is increased by this amount.
3. The $6,000 credit is posted to Sales (401). July 31 is entered in the Date column, S1 in the Post. Ref.
column, $6,000.00 in the Credit column, and the balance is increased by this amount.
4. Individual entries are posted to customers’ accounts in the accounts receivable ledger, usually on a
daily basis. The ✓ in the sales journal indicates that amounts have been posted.
Exercise 7.6
1. $475 – $190 = $285
2. $850 – $340 = $510
3. $175 – $52.50 = $122.50
Exercise 7.7
1. $3,500 – $875 = $2,625 – $393.75 = $2,231.25
2. $4,200 – $1,050 = $3,150 – $472.50 = $2,677.50
3. $2,550 – $510 = $2,040 – $204 = $1,836
Exercise 7.8
GENERAL JOURNAL
Date
2007
Apr. 30
Description
PAGE
Post.
Ref.
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remitted 8% sales tax on sales of $222,755
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
Credit
17,820.40
17,820.40
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Exercise 7.9
THE JEAN BARN
Schedule of Accounts Receivable
January 31, 2007
Cheryl Amos . . . . . . . . . . . . . . . . . . . . . . . .
Edward Cooke . . . . . . . . . . . . . . . . . . . . . .
Neal Fitzgerald . . . . . . . . . . . . . . . . . . . . . .
David Pifer . . . . . . . . . . . . . . . . . . . . . . . . .
Lisa Stanton . . . . . . . . . . . . . . . . . . . . . . . .
Nikki Whitaker . . . . . . . . . . . . . . . . . . . . . . .
2,115
283
756
1,224
2,700
2,052
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,130
Balance of Accounts Receivable: $9,130.00
Exercise 7.10
GENERAL LEDGER
ACCOUNT
Accounts Receivable
Date
2007
Mar. 1
14
22
Description
Balance
ACCOUNT
Post.
Ref.
Debit
✓
J42
J42
Description
324
108
2007
Mar. 14
22
Debit
J42
J42
Credit
24
8
2007
Mar. 14
22
140 䡲 Chapter 7
Description
Post.
Ref.
J42
J42
Balance
Debit
Credit
ACCOUNT NO.
Debit
300
100
231
24
32
Sales Returns and Allowances
Date
1,620
1,296
1,188
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Sales Tax Payable
Date
ACCOUNT
ACCOUNT NO.
Credit
451
Balance
Debit
Credit
300
400
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ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
Name
Cara Fountain
Date
TERMS
Post.
Ref.
Description
2007
Mar. 1
14
✓
J42
Balance
CM 101
Name
Sadie Palmer
Date
Credit
Balance
324
540
216
TERMS
Post.
Ref.
Description
2007
Mar. 1
22
Debit
Debit
✓
J42
Balance
CM 102
n/30
n/30
Credit
Balance
108
648
540
Problems
Problem 7.1A
SALES JOURNAL
Date
2007
July 1
6
11
17
23
27
29
31
31
PAGE 8
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Sales
Credit
Bonnie Franklin . . . . . . . .
Janet Judge . . . . . . . . . . .
Raymond Clay . . . . . . . . .
Melissa Gray . . . . . . . . . .
Angela Nguyen . . . . . . . . .
Clifton Wallace . . . . . . . . .
Sally Wei . . . . . . . . . . . . .
Ken Holt . . . . . . . . . . . . . .
918
1,134
2,808
972
540
1,026
1,404
432
68
84
208
72
40
76
104
32
850
1,050
2,600
900
500
950
1,300
400
Totals . . . . . . . . . . . . . . . .
9,234
684
8,550
Sales Slip
No.
Customer’s Name
501
502
503
504
505
506
507
508
Post.
Ref.
(111)
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(231)
(401)
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GENERAL LEDGER
ACCOUNT
Accounts Receivable
Date
Description
2007
July 1
31
Post.
Ref.
✓
S8
Balance
ACCOUNT
ACCOUNT NO.
Debit
Description
2007
July 31
31,400
40,634
9,234
ACCOUNT NO.
Post.
Ref.
Debit
S8
ACCOUNT
684
2007
July 31
684
ACCOUNT NO.
Description
Post.
Ref.
Debit
S8
231
Balance
Debit
Credit
Credit
Sales
Date
Balance
Debit
Credit
Credit
Sales Tax Payable
Date
111
Credit
401
Balance
Debit
Credit
8,550
8,550
Analyze: 41.52% of credit sales were for entertainment items. ($3,550/$8,550 = 41.52%)
Problem 7.2A
SALES JOURNAL
Date
2007
Feb. 1
5
9
17
23
27
28
28
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Julia Cheng . . . . . . . . . . .
Denise delaHoya . . . . . . .
Suzanne Tuttle . . . . . . . . .
Joan Clay . . . . . . . . . . . . .
Thomas Muir . . . . . . . . . .
Bernard Slaughter . . . . . .
Connie Taylor . . . . . . . . . .
James Walker . . . . . . . . .
3,510
2,268
5,940
5,832
3,672
4,293
1,944
3,942
260
168
440
432
272
318
144
292
3,250
2,100
5,500
5,400
3,400
3,975
1,800
3,650
Totals . . . . . . . . . . . . . . . .
31,401
2,326
29,075
Sales Slip
No.
Customer’s Name
1615
1616
1617
1618
1619
1620
1621
1622
28
PAGE 8
Post.
Ref.
(111)
142 䡲 Chapter 7
(231)
Sales
Credit
(401)
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GENERAL JOURNAL
Date
2007
Feb. 11
25
PAGE 24
Post.
Ref.
Description
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Denise delaHoya . . . . . . . . . . .
Accepted return of damaged chair, CM 702;
original sale made on Sales Slip 1616, Feb. 5
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Joan Clay . . . . . . . . . . . . . . . . .
Gave allowance for damaged bookcases, CM 703
original sale made on Sales Slip 1618, Feb. 17
Debit
451
231
111/✓
700
56
451
231
111/✓
400
32
Credit
756
432
GENERAL LEDGER
ACCOUNT
Date
2007
Feb. 1
11
25
28
Description
Balance
ACCOUNT
Date
2007
Feb. 1
11
25
28
Accounts Receivable
Balance
Date
Date
2007
Feb. 11
25
✓
J24
J24
S8
Debit
756
432
31,401
Description
Debit
✓
J24
J24
S8
7,170
7,114
7,082
9,408
56
32
2,326
ACCOUNT NO.
Post.
Ref.
Debit
Post.
Ref.
29,075
J24
J24
29,075
ACCOUNT NO.
Debit
Credit
700
400
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
401
Balance
Debit
Credit
Credit
Sales Returns and Allowances
231
Balance
Debit
Credit
Credit
S8
Description
15,636
14,880
14,448
45,849
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Sales
2007
Feb. 28
ACCOUNT
Post.
Ref.
Sales Tax Payable
Description
ACCOUNT
ACCOUNT NO.
451
Balance
Debit
Credit
700
1,100
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SPECTRA FURNITURE
Income Statement (Partial)
Month Ended February 28, 2007
Revenue
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Sales Returns and Allowances . . . .
29,075
1,100
Net Sales . . . . . . . . . . . . . . . . . . . . . . . .
27,975
Analyze: Net sales for January were $89,625 (Sales tax $7,170/Rate 0.08 = $89,625).
Problem 7.3A
SALES JOURNAL
Date
2007
Nov. 1
5
6
10
14
21
24
30
Sales Slip
No.
Customer’s Name
Post.
Ref.
1001
1002
1003
1004
1005
1006
1007
1008
Pauline Judge . . . . . . . . .
Janet Hutchison . . . . . . . .
Charles Brown . . . . . . . . .
Lisa Morgan . . . . . . . . . . .
Dorothy Watts . . . . . . . . .
Winnie Wu . . . . . . . . . . . .
Henry Okafor . . . . . . . . . .
Euline Brock . . . . . . . . . . .
✓
✓
✓
✓
✓
✓
✓
✓
30
Totals . . . . . . . . . . . . . . . .
PAGE 6
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Sales
Credit
1,620
2,268
756
1,836
594
3,456
648
4,104
120
168
56
136
44
256
48
304
1,500
2,100
700
1,700
550
3,200
600
3,800
15,282
1,132
14,150
(111)
(231)
(401)
GENERAL JOURNAL
Date
2007
Nov. 17
25
Description
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Lisa Morgan . . . . . . . . . . . . . . .
Accepted return of broken glass, CM 102;
original sale made on Sales Slip 1004, Nov. 10
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Winnie Wu . . . . . . . . . . . . . . . .
Gave allowance for damaged coffee table,
CM 103; original sale made on Sales Slip 1006,
Nov. 21
144 䡲 Chapter 7
PAGE 16
Post.
Ref.
Debit
451
231
111/✓
150
12
451
231
111/✓
350
28
Credit
162
378
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GENERAL LEDGER
ACCOUNT
Date
Accounts Receivable
Description
2007
Nov. 17
25
30
ACCOUNT
Date
Date
Date
2007
Nov. 17
25
Debit
Description
162
378
15,282
Debit
J16
J16
S6
14,742
12
28
12
40
1,132
Debit
S6
Post.
Ref.
14,150
J16
J16
14,150
ACCOUNT NO.
Debit
Credit
150
350
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
401
Balance
Debit
Credit
Credit
Sales Returns and Allowances
Description
1,092
ACCOUNT NO.
Post.
Ref.
231
Balance
Debit
Credit
Credit
Sales
Description
162
540
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Sales Tax Payable
2007
Nov. 30
ACCOUNT
Post.
Ref.
J16
J16
S6
2007
Nov. 17
25
30
ACCOUNT
ACCOUNT NO.
451
Balance
Debit
Credit
150
500
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ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Euline Brock
Date
2007
Nov. 30
NAME
Description
Sales Slip 1008
NAME
NAME
Sales Slip 1003
NAME
NAME
Sales Slip 1002
Post.
Ref.
Debit
S6
756
Post.
Ref.
Debit
S6
2,268
Pauline Judge
Sales Slip 1001
Post.
Ref.
Debit
S6
1,620
Lisa Morgan
Sales Slip 1004
CM 102
Post.
Ref.
S6
J16
Debit
146 䡲 Chapter 7
Credit
Post.
Ref.
Debit
S6
648
n/30
Balance
n/30
Balance
2,268
Credit
n/30
Balance
1,620
n/30
Credit
Balance
162
1,836
1,674
TERMS
Description
Balance
756
1,836
Henry Okafor
Sales Slip 1007
Credit
TERMS
Description
n/30
4,104
TERMS
Description
Date
2007
Nov. 24
4,104
Credit
TERMS
Description
Date
2007
Nov. 10
17
S6
Janet Hutchinson
Date
2007
Nov. 1
Debit
TERMS
Description
Date
2007
Nov. 5
Post.
Ref.
Charles Brown
Date
2007
Nov. 6
TERMS
Credit
n/30
Balance
648
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ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Dorothy Watts
Date
TERMS
Description
2007
Nov. 14
NAME
Debit
S6
594
Sales Slip 1005
Winnie Wu
Date
Credit
Balance
594
TERMS
Description
2007
Nov. 21
25
Post.
Ref.
n/30
Post.
Ref.
Debit
S6
3,456
Sales Slip 1006
CM 103
THE DINING ELEGANCE CHINA SHOP
Schedule of Accounts Receivable
November 30, 2007
Euline Brock . . . . . . . . . . . . . . . . . . . . . . . .
Charles Brown . . . . . . . . . . . . . . . . . . . . . .
Janet Hutchinson . . . . . . . . . . . . . . . . . . . .
Pauline Judge . . . . . . . . . . . . . . . . . . . . . . .
Lisa Morgan . . . . . . . . . . . . . . . . . . . . . . . .
Henry Okafor . . . . . . . . . . . . . . . . . . . . . . .
Dorothy Watts . . . . . . . . . . . . . . . . . . . . . . .
Winnie Wu . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
n/30
Credit
Balance
378
3,456
3,078
4,104
756
2,268
1,620
1,674
648
594
3,078
14,742
Balance of Accounts Receivable account: $14,742.00
Analyze: Twenty-four additional postings would be needed (8 x 3).
Problem 7.4A
SALES JOURNAL
Sales Slip
No.
Date
2007
Jan. 3
8
9
10
20
22
25
27
31
1081
1082
1083
1084
1085
1086
1087
1088
Customer’s Name
Thomas Florist . . . . . . . . . . . . .
Carter Garden Supply . . . . . . . .
Thomasville Flower Shop . . . . .
Moore’s Flower Shop . . . . . . . .
Cedar Hill Floral Shop . . . . . . . .
Applegate Nursery . . . . . . . . . .
Moore’s Flower Shop . . . . . . . .
Thomas Florist . . . . . . . . . . . . .
PAGE 7
Post.
Ref.
✓
✓
✓
✓
✓
✓
✓
✓
Total . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable Dr./
Sales Cr.
500
775
462
530
480
680
427
925
4,779
(111/401)
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GENERAL JOURNAL
Date
2007
Jan. 15
31
PAGE 11
Post.
Ref.
Description
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Thomasville Flower Shop . . . .
Accepted return of damaged merchandise,
CM 101; original sale made on Invoice 1083,
January 9
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Thomas Florist . . . . . . . . . . . . .
Gave allowance for damaged merchandise,
CM 102; original sale made on Invoice 1088,
January 27
Debit
451
111/✓
50
451
111/✓
150
Credit
50
150
GENERAL LEDGER
ACCOUNT
Accounts Receivable
Date
Description
2007
Jan. 15
31
31
ACCOUNT
Post.
Ref.
J11
J11
S7
Debit
Description
50
150
4,779
2007
Jan. 31
Debit
S7
4,579
2007
Jan. 15
31
148 䡲 Chapter 7
Description
Post.
Ref.
4,779
J11
J11
4,779
ACCOUNT NO.
Debit
50
150
Credit
401
Balance
Debit
Credit
Credit
Sales Returns and Allowances
Date
50
200
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Sales
Date
ACCOUNT
ACCOUNT NO.
451
Balance
Debit
Credit
50
200
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ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Applegate Nursery
Date
2007
Jan. 22
NAME
Description
Invoice 1086
NAME
Description
Invoice 1082
NAME
Description
Invoice 1085
NAME
Description
Invoice 1084
Invoice 1087
NAME
Description
Invoice 1081
Invoice 1088
CM 102
Post.
Ref.
Debit
S7
775
Post.
Ref.
Debit
S7
480
Invoice 1083
CM 101
Credit
Debit
S7
S7
530
427
Credit
Debit
Credit
S7
J11
Balance
n/45
Balance
n/45
Balance
150
500
1,425
1,275
n/45
Credit
Balance
50
462
412
462
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
n/45
Credit
500
925
Debit
Balance
530
957
TERMS
Post.
Ref.
n/45
480
TERMS
Post.
Ref.
Balance
775
TERMS
Post.
Ref.
n/45
680
TERMS
S7
S7
J11
Description
Credit
TERMS
Thomasville Flower Shop
Date
2007
Jan. 9
15
680
Thomas Florist
Date
2007
Jan. 3
27
31
S7
Moore’s Flower Shop
Date
2007
Jan. 10
25
Debit
Cedar Hill Floral Shop
Date
2007
Jan. 20
Post.
Ref.
Carter Garden Supply
Date
2007
Jan. 8
TERMS
Chapter 7 䡲 149
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SPECIAL OCCASIONS FLOWER SHOP
Schedule of Accounts Receivable
January 31, 2007
Applegate Nursery . . . . . . . . . . . . . . . . . . .
Carter Garden Supply . . . . . . . . . . . . . . . . .
Cedar Hill Floral Shop . . . . . . . . . . . . . . . .
Moore’s Flower Shop . . . . . . . . . . . . . . . . .
Thomas Florist . . . . . . . . . . . . . . . . . . . . . .
Thomasville Flower Shop . . . . . . . . . . . . . .
680
775
480
957
1,275
412
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,579
Balance of Accounts Receivable account: $4,579.00
Analyze: Damaged goods decreased net sales revenue by $200 and by 4% ($200/$4,779 = .04).
Problem 7.1B
SALES JOURNAL
Date
2007
June 1
6
11
17
23
27
29
30
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Sales
Credit
Barbara Merino . . . . . . . .
David Reed . . . . . . . . . . .
Brenda Davis . . . . . . . . . .
Beatrice Wilson . . . . . . . .
Doris Lazo . . . . . . . . . . . .
Carol West . . . . . . . . . . . .
Rickey Eddie . . . . . . . . . .
Bridgette Nelson . . . . . . . .
810
1,134
2,808
972
540
1,296
1,620
648
60
84
208
72
40
96
120
48
750
1,050
2,600
900
500
1,200
1,500
600
Totals . . . . . . . . . . . . . . . .
9,828
728
9,100
Sales Slip
No.
Customer’s Name
201
202
203
204
205
206
207
208
30
PAGE 8
Post.
Ref.
(111)
150 䡲 Chapter 7
(231)
(401)
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GENERAL LEDGER
ACCOUNT
Date
2007
June 1
30
Accounts Receivable
Description
Balance
ACCOUNT
Date
Date
2007
June 30
Post.
Ref.
✓
S8
Debit
Description
72,800
82,628
9,828
ACCOUNT NO.
Post.
Ref.
Debit
S8
728
728
ACCOUNT NO.
Post.
Ref.
S8
Debit
231
Balance
Debit
Credit
Credit
Sales
Description
111
Balance
Debit
Credit
Credit
Sales Tax Payable
2007
June 30
ACCOUNT
ACCOUNT NO.
Credit
401
Balance
Debit
Credit
9,100
9,100
Analyze: 41.76% of credit sales were for entertainment items. ($3,800/$9,100 = 41.76%)
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Page 152
Problem 7.2B
SALES JOURNAL
Date
2007
June 1
5
9
17
23
27
29
30
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Sales Slip
No.
Customer’s Name
1601
1602
1603
1604
1605
1606
1607
1608
Christine Berry . . . . . . . . .
Paula Adams . . . . . . . . . .
Patrick Chen . . . . . . . . . . .
Raul Alvarez . . . . . . . . . . .
Kenitra Brown . . . . . . . . . .
Charles Brown . . . . . . . . .
Rosetta London . . . . . . . .
James Howard . . . . . . . . .
2,214
1,404
7,560
4,320
4,104
3,888
1,350
3,348
164
104
560
320
304
288
100
248
2,050
1,300
7,000
4,000
3,800
3,600
1,250
3,100
Totals . . . . . . . . . . . . . . . .
28,188
2,088
26,100
30
Post.
Ref.
PAGE 9
(111)
(231)
(401)
GENERAL JOURNAL
Date
2007
June 11
25
Description
Sales Returns and Allowances . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Paula Adams . . . . . . . . . . . . . .
Accepted return of damaged chair,
Credit Memo 215; original sale made on
Sales Slip 1602, June 5
Sales Returns and Allowances . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Raul Alvarez . . . . . . . . . . . . . . .
Gave allowance for damages bookcases,
Credit Memo 216; original sale made on
Sales Slip 1604, June 17
152 䡲 Chapter 7
Sales
Credit
PAGE 26
Post.
Ref.
Debit
451
231
111/✓
400
32
451
231
111/✓
250
20
Credit
432
270
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GENERAL LEDGER
ACCOUNT
Date
2007
June 1
Description
Date
Date
432
270
28,188
Description
Debit
2,088
Debit
26,100
26,100
ACCOUNT NO.
Post.
Ref.
Debit
J26
J26
Credit
400
250
401
Balance
Debit
Credit
Credit
Sales Returns and Allowances
2007
June 11
25
4,515
4,483
4,463
6,551
32
20
ACCOUNT NO.
Post.
Ref.
231
Balance
Debit
Credit
Credit
S9
Description
22,576
22,144
21,874
50,062
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Sales
2007
June 30
ACCOUNT
Debit
✓
J26
J26
S9
Balance
Date
Post.
Ref.
Sales Tax Payable
Description
ACCOUNT
ACCOUNT NO.
✓
J26
J26
S9
Balance
11
25
30
ACCOUNT
2007
June 1
11
25
30
Accounts Receivable
451
Balance
Debit
Credit
400
650
SUPER FURNITURE MART
Income Statement (Partial)
June 30, 2007
Revenue
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Sales Returns and Allowances . . . .
Net Sales . . . . . . . . . . . . . . . . . . . . . . . .
26,100
650
25,450
Analyze: Total net sales for April and May were $56,437.50 (Sales tax $4,515/Rate 0.08 = $56,437.50).
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Problem 7.3B
SALES JOURNAL
Date
2007
Feb. 3
4
5
8
9
10
14
15
20
22
28
Sales Slip
No.
201
202
203
204
205
206
207
208
209
210
211
28
PAGE 6
Customer’s Name
Post.
Ref.
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Sales
Credit
Ronald Brown . . . . . . . . . .
Ken Hamlett . . . . . . . . . . .
Vickie Neal . . . . . . . . . . . .
Amy Peloza . . . . . . . . . . .
Luther Evans . . . . . . . . . .
Gordon Edwards . . . . . . .
Ronald Brown . . . . . . . . . .
Kerry Goree . . . . . . . . . . .
Ned Jones . . . . . . . . . . . .
Susan Anderson . . . . . . . .
Melissa Thomas . . . . . . . .
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
54
216
324
432
432
162
216
324
108
540
648
4
16
24
32
32
12
16
24
8
40
48
50
200
300
400
400
150
200
300
100
500
600
3,456
256
3,200
Totals . . . . . . . . . . . . . . . .
(111)
(231)
(401)
GENERAL JOURNAL
Date
2007
Feb. 9
13
Description
Sales Returns and Allowances . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Vickie Neal . . . . . . . . . . . . . . . .
Accepted return of incomplete gift pack, Credit
Memo 101; original sale made on Sales
Slip 203, Feb. 5
Sales Returns and Allowances . . . . . . . . . . . . . . . . . . .
Sales Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Amy Peloza . . . . . . . . . . . . . . .
Accepted return of broken glass, Credit
Memo 102; original sale made on Sales
Slip 204, Feb. 8
154 䡲 Chapter 7
PAGE 16
Post.
Ref.
Debit
451
231
111/✓
50
4
451
231
111/✓
50
4
Credit
54
54
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GENERAL LEDGER
ACCOUNT
Date
Accounts Receivable
Description
2007
Feb. 9
13
28
ACCOUNT
Date
Date
Date
2007
Feb. 9
13
Debit
Description
54
54
3,456
Debit
J16
J16
S6
3,348
4
4
4
8
256
Debit
3,200
Sales Returns and Allowances
Post.
Ref.
J16
J16
3,200
ACCOUNT NO.
Debit
Credit
50
50
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
401
Balance
Debit
Credit
Credit
S6
Description
248
ACCOUNT NO.
Post.
Ref.
231
Balance
Debit
Credit
Credit
Sales
Description
54
108
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Sales Tax Payable
2007
Feb. 28
ACCOUNT
Post.
Ref.
J16
J16
S6
2007
Feb. 9
13
28
ACCOUNT
ACCOUNT NO.
451
Balance
Debit
Credit
50
100
Chapter 7 䡲 155
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ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Susan Anderson
Date
2007
Feb. 22
NAME
Description
Sales Slip 210
NAME
NAME
Sales Slip 201
Sales Slip 207
NAME
NAME
Sales Slip 206
NAME
Debit
S6
S6
54
216
Post.
Ref.
Debit
S6
162
Sales Slip 205
Post.
Ref.
Debit
S6
432
Kerry Goree
Sales Slip 208
Post.
Ref.
Debit
S6
324
Ken Hamlett
Sales Slip 202
Post.
Ref.
Debit
S6
216
Ned Jones
156 䡲 Chapter 7
Credit
Post.
Ref.
Debit
S6
108
n/30
Balance
n/30
Balance
162
Credit
n/30
Balance
432
Credit
n/30
Balance
324
Credit
n/30
Balance
216
TERMS
Description
Balance
54
270
TERMS
Description
Sales Slip 209
Credit
TERMS
Description
n/30
540
TERMS
Description
Date
2007
Feb. 20
Post.
Ref.
Luther Evans
Date
2007
Feb. 4
540
Credit
TERMS
Description
Date
2007
Feb. 15
S6
Gordon Edwards
Date
2007
Feb. 9
Debit
TERMS
Description
Date
2007
Feb. 10
Post.
Ref.
Ronald Brown
Date
2007
Feb. 3
14
TERMS
Credit
n/30
Balance
108
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ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Vicki Neal
Date
2007
Feb. 5
9
NAME
NAME
Sales Slip 203
CM 101
S6
J16
Debit
Balance
54
324
270
TERMS
Post.
Ref.
Description
Sales Slip 204
CM 102
S6
J16
Debit
Sales Slip 211
SPECIAL ELEGANCE GIFT SHOP
Schedule of Accounts Receivable
February 28, 2007
Susan Anderson . . . . . . . . . . . . . . . . . . . . .
Ronald Brown . . . . . . . . . . . . . . . . . . . . . . .
Gordon Edwards . . . . . . . . . . . . . . . . . . . . .
Luther Evans . . . . . . . . . . . . . . . . . . . . . . .
Kerry Goree . . . . . . . . . . . . . . . . . . . . . . . .
Ken Hamlett . . . . . . . . . . . . . . . . . . . . . . . .
Ned Jones . . . . . . . . . . . . . . . . . . . . . . . . .
Vickie Neal . . . . . . . . . . . . . . . . . . . . . . . . .
Amy Peloza . . . . . . . . . . . . . . . . . . . . . . . .
Melissa Thomas . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance
54
432
378
TERMS
Description
Post.
Ref.
Debit
S6
648
n/30
Credit
432
Melissa Thomas
n/30
Credit
324
Amy Peloza
Date
2007
Feb. 28
Post.
Ref.
Description
Date
2007
Feb. 8
13
TERMS
Credit
n/30
Balance
648
540
270
162
432
324
216
108
270
378
648
3,348
Balance of Accounts Receivable account: $3,348.00
Analyze: Twenty-two postings were made to the general ledger. Thirty-three additional postings would be
made if the business did not use a sales journal.
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Page 158
Problem 7.4B
SALES JOURNAL
Sales Slip
No.
Date
2007
Feb. 3
8
9
10
20
22
25
27
2201
2202
2203
2204
2205
2206
2207
2208
28
Customer’s Name
Thompson Funeral Home . . . . .
Meadows Nursery . . . . . . . . . . .
DeSoto Flower Shop . . . . . . . . .
Lovelace Nursery . . . . . . . . . . .
Lovelace Nursery . . . . . . . . . . .
Southwest Nursery . . . . . . . . . .
Denton Flower Shop . . . . . . . . .
Thompson Funeral Home . . . . .
PAGE 5
Post.
Ref.
Accounts Receivable Dr./
Sales Cr.
✓
✓
✓
✓
✓
✓
✓
✓
400
800
1,050
700
650
850
450
750
Total . . . . . . . . . . . . . . . . . . . . .
5,650
(111/401)
GENERAL JOURNAL
Date
2007
Feb. 15
28
Description
Sales Returns and Allowances . . . . . . . . . . . . . . . . . . .
Accounts Receivable/DeSoto Flower Shop . . . . . . . .
Accepted return of damaged merchandise,
Credit Memo 105; original sale made on
Invoice 2203, February 9
Sales Returns and Allowances . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Thompson Funeral Home . . . .
Gave allowance for damaged merchandise,
Credit Memo 106; original sale made on
Invoice 2208, February 27
158 䡲 Chapter 7
PAGE 10
Post.
Ref.
Debit
451
111/✓
100
451
111/✓
75
Credit
100
75
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Page 159
GENERAL LEDGER
ACCOUNT
Date
Accounts Receivable
Description
2007
Feb. 15
28
28
Post.
Ref.
J10
J10
S5
ACCOUNT
Date
Debit
100
75
5,650
Post.
Ref.
Debit
S5
ACCOUNT
100
175
5,475
ACCOUNT NO.
Description
2007
Feb. 15
28
Post.
Ref.
5,650
J10
J10
5,650
ACCOUNT NO.
Debit
401
Balance
Debit
Credit
Credit
Sales Returns and Allowances
Description
111
Balance
Debit
Credit
Credit
Sales
2007
Feb. 28
Date
ACCOUNT NO.
Credit
100
75
451
Balance
Debit
Credit
100
175
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Denton Flower Shop
Date
2007
Feb. 25
NAME
Description
Invoice 2207
NAME
Description
Invoice 2203
CM 105
Debit
S5
450
Post.
Ref.
S5
J10
Description
Invoice 2204
Invoice 2205
Credit
Debit
S5
S5
700
650
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
n/30
Balance
100
1,050
950
TERMS
Debit
Balance
Credit
1,050
Post.
Ref.
n/30
450
TERMS
Lovelace Nursery
Date
2007
Feb. 10
20
Post.
Ref.
DeSoto Flower Shop
Date
2007
Feb. 9
15
TERMS
Credit
n/30
Balance
700
1,350
Chapter 7 䡲 159
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Page 160
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Meadows Nursery
Date
2007
Feb. 8
NAME
Description
Invoice 2202
NAME
Debit
S5
800
Credit
Invoice 2206
Post.
Ref.
Debit
S5
850
Thompson Funeral Home
Credit
Post.
Ref.
Invoice 2201
Invoice 2208
CM 106
S5
S5
J10
Debit
Balance
n/30
Balance
850
TERMS
Description
n/30
800
TERMS
Description
Date
2007
Feb. 3
27
28
Post.
Ref.
Southwest Nursery
Date
2007
Feb. 22
TERMS
n/30
Credit
Balance
75
400
1,150
1,075
400
750
THE VINTAGE NURSERY
Schedule of Accounts Receivable
February 28, 2007
Denton Flower Shop . . . . . . . . . . . . . . . . . .
DeSoto Flower Shop . . . . . . . . . . . . . . . . .
Lovelace Nursery . . . . . . . . . . . . . . . . . . . .
Meadows Nursery . . . . . . . . . . . . . . . . . . . .
Southwest Nursery . . . . . . . . . . . . . . . . . . .
Thompson Funeral Home . . . . . . . . . . . . . .
450
950
1,350
800
850
1,075
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,475
Balance of Accounts Receivable account: $5,475.00
Analyze: Damaged goods decreased net sales revenue by $175 and by 3% ($175/$5,650 = .03).
160 䡲 Chapter 7
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Page 161
Challenge Problem
SALES JOURNAL
Sales Slip
No.
Date
2007
Aug. 1
5
9
14
22
26
30
1001
1002
1003
1004
1005
1006
1007
31
Customer’s Name
Carter’s Department Store . . . .
Delux Bookstores . . . . . . . . . . .
Metroplex Game Center . . . . . .
Play Therapy Toy Stores . . . . . .
Hinton Game Store . . . . . . . . . .
Carter’s Department Store . . . .
Pemberton Toy Center . . . . . . .
PAGE 9
Post.
Ref.
Accounts Receivable Dr./
Sales Cr.
✓
✓
✓
✓
✓
✓
✓
11,100
14,350
5,250
15,300
11,040
15,120
13,680
Total . . . . . . . . . . . . . . . . . . . . .
85,840
(111/401)
GENERAL JOURNAL
Date
2007
Aug. 18
PAGE 25
Post.
Ref.
Description
Sales Returns & Allowances . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable/Metroplex Game Center . . . . .
Accepted return of damaged merchandise,
Credit Memo 151; original sale made on
Invoice 1003, August 9
451
111/✓
Debit
Credit
5,250
5,250
GENERAL LEDGER
ACCOUNT
Date
2007
Aug. 1
18
31
Accounts Receivable
Description
Balance
ACCOUNT
Date
Date
2007
Aug. 18
Post.
Ref.
✓
J25
S9
Debit
Description
5,250
85,840
Debit
S9
Post.
Ref.
85,840
J25
85,840
ACCOUNT NO.
Debit
Credit
5,250
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
401
Balance
Debit
Credit
Credit
Sales Returns and Allowances
Description
78,410
73,160
159,000
ACCOUNT NO.
Post.
Ref.
111
Balance
Debit
Credit
Credit
Sales
2007
Aug. 31
ACCOUNT
ACCOUNT NO.
451
Balance
Debit
Credit
5,250
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ACCOUNTS RECEIVABLE LEDGER
NAME
Carter’s Department Store
Date
2007
Aug. 1
1
26
NAME
Description
Balance
Invoice 1001
Invoice 1006
NAME
NAME
Invoice 1002
NAME
NAME
Invoice 1005
Post.
Ref.
Debit
S9
14,350
Post.
Ref.
Debit
S9
11,040
Metroplex Game Center
Description
Post.
Ref.
Debit
Description
Invoice 1007
Post.
Ref.
Debit
S9
13,680
Description
162 䡲 Chapter 7
Credit
Debit
✓
S9
15,300
n/45
Balance
n/45
Balance
11,040
n/45
Credit
Balance
5,250
19,010
24,260
19,010
Credit
n/45
Balance
13,680
TERMS
Post.
Ref.
Balance
14,350
TERMS
Play Therapy Toy Stores
Balance
Invoice 1004
Credit
5,250
Pemberton Toy Center
n/45
28,900
40,000
55,120
TERMS
✓
S9
J25
Balance
Invoice 1003
CM 151
Date
2007
Aug. 1
14
11,100
15,120
Credit
TERMS
Description
Date
2007
Aug. 30
✓
S9
S9
Hinton Game Store
Date
2007
Aug. 1
9
18
Debit
TERMS
Description
Date
2007
Aug. 22
Post.
Ref.
Delux Bookstores
Date
2007
Aug. 5
TERMS
Credit
n/45
Balance
30,500
45,800
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THE TOY SHOP
Income Statement (Partial)
Month Ended August 31, 2007
Revenue
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less Sales Returns and Allowances . . . .
85,840
5,250
Net Sales . . . . . . . . . . . . . . . . . . . . . . . .
80,590
THE TOY SHOP
Schedule of Accounts Receivable
August 31, 2007
Carter’s Department Store . . . . . . . . . . . . .
Delux Bookstores . . . . . . . . . . . . . . . . . . . .
Hinton Game Store . . . . . . . . . . . . . . . . . . .
Metroplex Game Center . . . . . . . . . . . . . . .
Pemberton Toy Center . . . . . . . . . . . . . . . .
Play Therapy Toy Stores . . . . . . . . . . . . . . .
55,120
14,350
11,040
19,010
13,680
45,800
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
159,000
Balance of Accounts Receivable account: $159,000.00
Analyze: The effect would be an increase in net sales.
Critical Thinking Problem
1. An electronic system would prevent this mistake because the computer would automatically post and
update the customer’s subsidiary ledger account. This mistake would not be identified in a manual
system until the Accounts Receivable general ledger account was reconciled to the schedule of
accounts receivable.
2. The use of an electronic scanner should reduce unrecorded sales. Each item has to be passed over
the scanner, which automatically records the price. This process reduces the chance that an item is
overlooked; but with either system, it is possible for the salesclerk to deliberately not charge a customer
for a purchase. The owner and supervisors must be alert to this possibility and need to check the
salesclerk’s work on a regular basis. Discrepancies in the inventory may identify extensive abuses of
this nature.
3. The computer can be programmed to alert the salesclerk by means of a code number or flashing sign
on the register/terminal display screen that a particular credit card number has been reported stolen.
The register/terminal will halt processing the transaction or instruct the salesclerk to check with a
supervisor before proceeding with the transaction. With a manual system, the salesclerk would have to
consult a separate list of stolen numbers before processing a credit card transaction. Provided the
stolen credit card numbers are entered promptly in the computer files, the electronic system would
prevent charging a sale on a stolen credit card.
4. An electronic scanner would prevent customers from being charged an incorrect price. Because the
computer would be programmed with the sale prices, the scanner would automatically record the
correct price. A manual system depends on the salesclerk’s memory of price changes or requires new
price tags to be placed on sale items. An electronic system would be more dependable and efficient in
this situation.
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Business Connections
Managerial Focus
1. Measures damaged or poor quality goods or late deliveries.
2. Advantages: minimized risk of receivable losses; reduced staffing costs. Disadvantages: discount fees;
loss of sales if customers do not have credit cards.
3. Credit policies, customer account documentation.
4. The actual filing of a tax return is procedural, but expert advice is needed to comply with tax laws and
maximize profits.
5. Increase sales volume.
6. Losses from uncollectible accounts.
7. Accurate and complete records.
8. Aid in extending credit, identify slow-paying customers.
Ethical Dilemma
Watch when a customer pays a bill to see if Margarita puts the money in the cash register or just puts it in
her pocket and writes a credit memo to erase it from the Accounts Receivable Ledger.
Streetwise
1. Net sales increased by 12.8% from 2003 to 2004 which were attributable to full year sales from
183 new stores, 5.4% comparable store-for-store sales increase, and sales from newly-acquired
businesses.
2. Net receivables increased by 36.6% from 2003 to 2004. Net receivables increased at a faster rate than
net sales.
Financial Statement Analysis
1. Feb. 1 through Jan. 31
2. Sales Returns and Allowances
3. 25.6%
Analyze Online: Answers will vary depending on the year.
Extending the Thought
Benefits:
• no overhead costs for store locations and costs of operations in these locations
• lower labor costs
• lower merchandising and inventory maintenance costs at physical locations
• ability to offer products at a discounted price due to lower operational costs
Drawbacks:
• difficult to display and merchandise products online
• down computer systems and problems with Internet connections will cause losses of sales and create
frustration for online customers
Business Communication
Students’ memos will vary. The memo is an important method of communication for relaying everything from
routine news to small reports. Before students begin this activity, explain that a good memo is clear,
accurate, comprehensive, concise, and professional.
Team Work
Sales associate would not record a transaction. Louisa’s A/P clerk would create a purchase order for
$50,000 and record a debit to purchases and a credit to A/P. The A/R clerk would create a sales invoice and
record a debit to A/R and credit to Sales.
Internet Connection
Autocreation of P.O. from Sales Order, create A/P and A/R Credit memos, quick conversion to other
programs, invoice customers, track payments and sales taxes, print checks and create purchase orders
from estimates.
164 䡲 Chapter 7
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Practice Test Answer Key
Part A
1. F
2. T
3. T
4. T
5. F
6. T
7. F
8. F
9. T
10. T
11. F
12. T
13. T
14. T
15. T
16. T
17. T
18. F
19. F
20. T
True–False
Part B
1. f
2. d
3. b
4. a
5. e
6. c
7. g
Matching
Part C Exercise
1. The balance was carried over from December 2006.
2. By referring to a copy of Sales Slip 101.
3. It was most likely a sales return or allowance. Refer to the January 17 entry on page 1 of the general
journal.
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Chapter 7 䡲 165