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

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 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 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 Journal

Three copies of sales invoice prepared
1.
Copy given to customer
2.
Copy given to shipping department of selling company
3.
Copy used a source document for sale

Sale recorded at time sale is made

Accounts Receivable has normal debit balance


Sales has normal credit balance


Debited for total of sales and sales tax to show increase
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
SALES JOURNAL
DATE
ACCOUNT DEBITED
PAGE
SALE
NO.
POST.
REF.
ACCOUNTS
RECEIVABLE
DEBIT
SALES
CREDIT
?
SALES TAX
PAYABLE
CREDIT
2012
1
Nov 3 Village Crafts
76
572.40
540.00 32.40
• 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.
1
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

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 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 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 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 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 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


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


Debited for total sales and sales tax to show increase in asset
account
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
CASH RECEIPTS JOURNAL
1
6
PAGE
GENERAL
SALES
TAX
POS
DATE
ACCTS
RECVBL
PAYABL SALES
SALES
DISC’T CASH
E
E
DOC. TRE
ACCOUNT TITLE NO. F. DEBIT CREDIT CREDIT CREDIT CREDIT DEBIT DEBIT
2012
1
Nov 4 √
TS34
5460.0
0
327.60
5787.6
0
• 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.
1
PRACTICE:

10-2 WT - Textbook page 284, WP page 227

Oct. 13th transaction
10-2: Journalizing Cash Receipts
Using a Cash Receipts Journal

Cash receipt on account transaction decreases future
amounts to be collected from customer


Cash has normal debit balance


Increases cash account balance and decreases accounts
receivable account 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
CASH RECEIPTS JOURNAL
PAGE
GENERAL
DATE
POS
TRE
1
6
SALES
TAX
ACCTS
RECVBL
PAYABL SALES
SALES
DISC’T CASH
E
E
DOC.
ACCOUNT TITLE NO. F. DEBIT CREDIT CREDIT CREDIT CREDIT DEBIT DEBIT
2012
1
Nov 6 Country Crafters
R90
2162.40
2162.40
• 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
1
PRACTICE:

10-2 WT - Textbook p. 284, WP page 227

Oct. 4th transaction
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
CASH RECEIPTS JOURNAL
PAGE
GENERAL
DATE
POS
TRE
1
6
SALES
TAX
ACCTS
RECVBL
PAYABL SALES
SALES
DISC’T CASH
E
E
DOC.
ACCOUNT TITLE NO. F. DEBIT CREDIT CREDIT CREDIT CREDIT DEBIT DEBIT
2012
1
Cumberland
Nov 7 Center
R91
1200.00
24.00
1176.00
• 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
1
PRACTICE:

10-2 WT - Txtbk p. 284, WP p. 227
 Oct.

30th transaction
10-2 OYO!!