Chapter 10
RECEIPTS AND CASH
PAYMENTS
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Learning Objective
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Credit Terms
• The ______________ is the _____ the _____ allows
the _____ before _____ payment has to be made.
• A ______________ is an amount that a customer can
_____ if a bill is paid within a __________ _____ .
• The discount is based on the total amount of the
_____ after ____________________ and _____
_____ on the invoice have been deducted.
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Credit Terms
It is said “One, Fifteen Net 60”
1/15/, n/60
1/15/,
• The seller offers a 1 percent discount if the bill is paid
within 15 days after the invoice date, and the whole
bill must be paid within 60 days after the last day of the
month.
It is said “Two, Ten EOM, Net 60”
2/10
/, EOM
2/10/,
EOM,, n/60
• The seller offers a 2 percent discount if the bill is paid
within 10 days after the end of the month , and the whole
bill must be paid within 60 days after the last day of the
month.
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Practice Exercise 1
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Learning Objective
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Sales Discounts
Transaction (a) – On August 10, Whitewater Raft
Supply sold merchandise on account to Mesa River
Raft Company, invoice no. 9384, $1.933.50; terms
2/10, n/30.
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Sales Discounts
Transaction (b) – On August 10, received check from
Mesa River Raft Company for $1,894.83 in payment of
invoice no. 9384, less discount of $38.67.
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Sales Returns
Transaction (a) – On September 1, Whitewater Raft
Supply sold merchandise on account to Rugged River
Company, $3,614, invoice no. 9391, terms 2/10, n/30.
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Sales Returns
Transaction (b) – On September 5, Rugged River
Company returned $254 worth of the merchandise.
Whitewater Raft Supply issued credit memorandum no.
1069 and recorded the transaction.
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Sales Returns
Transaction (c) – On September 8, received a check
from Rugged River Company for $3,292.80 in payment
of invoice no. 9391, less return and cash discount.
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No Sales Discount Involved
Transaction (a) – On April 1, Blue Merchandise
Company sold merchandise on account to Yellow
Company, invoice no. 1294, $9,540, terms 2/10, n/30,
and recorded the sale in the general journal.
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No Sales Discount Involved
Transaction (b) – On April 26, received check from
Yellow Company for $9,450 in payment of invoice no.
1294.
The discount was not applied to the invoice
amount because ____________________
__________________________________.
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Practice Exercise 2
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Learning Objective
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Purchase Discounts
• The _____________________ account, like
Purchases Returns and Allowances, is a ______
______ .
• The Purchase Discounts account is treated as a
__________ from _____________________ on the
_____________ income statement.
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Purchase Discounts
Transaction (a) – On August 2, Whitewater Raft Supply bought
merchandise on account from Pataponia, Inc., invoice no. 2706,
$1,710; terms 2/10, n/30; dated July 31; FOB San Francisco,
freight prepaid and added to the invoice, $85.50.
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Purchase Discounts
Transaction (b) – On August 8, issued Ck. No. 2076 to
Pataponia, Inc., in payment of invoice no. 2706, less
cash discount of $34.20, $1,761.30.
$1,710.00
+
85.50
$1,795.50
34.20
$ 1761.30
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Purchase Discounts
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No Purchase Discounts Involved
Transaction (a) – On November 1, Blue Merchandise
Company bought merchandise on account from Grey,
Inc., invoice no. 3901, $4,600; terms 2/10, n/30, dated
October 31.
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No Purchase Discounts Involved
Transaction (b) – On November 28, issued Ck. No.
1151 to Grey, Inc., in payment of invoice no. 3901,
$4,600.
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Practice Exercise 3
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Learning Objective
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Trade Discounts
• Manufacturers and wholesalers publish catalogs listing
•
•
•
their products at _________ prices.
These organizations offer their customers substantial
reductions, called _______________ , from the ______
prices.
Trade discounts are ______________ because they are
_______________ to ______ payments.
Manufacturers and wholesalers use trade discounts to
______ the high cost of ________________ when selling
prices change.
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Trade Discounts
• Firms may quote trade
discounts as a single
percentage
• For example, a distributor of
furnaces grants a single
discount off the listed catalog
price of $8,000. The actual
selling price is $4,800,
calculated as follows:
Neither the seller nor the
buyer records trade
discounts in the
accounts; they enter only
the selling price.
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Trade Discounts as a Chain of Percentages
• Firms may also quote trade
discounts as a chain, or
series, of percentages.
• For example, a distributor of
automobile parts grants
discounts of 30 percent, 10
percent, and 10 percent off
the listed catalog price of
$900.
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Cash Discounts
• Cash discounts could also
apply in situations involving
trade discounts.
• For example, using the
preceding sale, it also
includes a cash discount of
2/10; n/30.
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© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Practice Exercise 4
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Learning Objective
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The Cash Receipts Journal
• A ____________________ contains all transactions in
which ______ is received, or ______ .
• When a cash receipts journal is used, all transactions
in which cash is ______ ________ be recorded in it.
• A cash receipts journal may be used for a ______ as
well as a ____________________ business.
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Recording Cash Receipts
October 1 – Sold merchandise on account to Green
River Rafts, invoice no. 10050, $3,500; terms 2/10,
n/30.
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Recording Cash Receipts
October 4 – Sold $500 in merchandise and the
customer used a credit card.
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Recording Cash Receipts
As an alternative, many businesses postpone recording
the amount of bank credit card expense until they
receive notification from their bank or the bank
statement. Assume that Whitewater Raft Supply had
credit card sales of $11,448. The entry is as follows:
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Recording Cash Receipts
The restaurant’s next bank statement includes a debit
memorandum for credit card charges of $457.92, using
an assumed 4 percent discount rate ($11,448 x 0.04).
The business handles this in a similar manner to a
check service charge.
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The Cash Receipts Journal
The entry of October 1 does not involve cash, so
it is not entered in the cash receipts journal.
Cash was received on October 4, so the sale of merchandise
involving a credit card is entered in the cash receipts journal.
In this entry, the “Account Credited” column is used to
identify the $9,000 in “Other Accounts Credit” credit as
a credit to D. M. Bruce, Capital for $9,000.
Same “Other Accounts Credit” is used for the October 8
equipment transaction.
On October 5, $416 was collected on account
from L.R. Ray, a charge customer.
The “Account Credited” column is used to
identify the customer who made the payment.
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The Cash Receipts Journal
Here are some other transactions made during the month
that involved cash. Notes Payable is used instead of Accounts Payable
because a promissory note was issued.
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Advantages of Using a Cash Receipt Journal
• Transactions generally can be recorded on one line.
• All transactions involving _______ to _____ are
•
•
recorded in _____ place.
It eliminates much repetition in posting when there are
numerous transactions involving _____ _______ .
Special columns can be used for specialized
transactions and posted as one total.
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Practice Exercise 5
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Learning Objective
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The Cash Payments Journal
• The __________________________ is a special
journal used to record all transactions in which _____
___________ , or ___________ .
• When the cash payments journal is used, all
transactions in which _____ is _________ ______ be
recorded in it.
• The cash payments journal may be used for either a
_____ or a ___________ business.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Cash Payments Journal
October 2 – Bought merchandise on account from Pataponia, Inc., invoice
no. 2746, $2,500; terms 2/10, n/30; dated September 30; FOB San Francisco,
freight prepaid and added to the invoice, $100.25.
October 8 – Issued Ck. No. 2226 to Pataponia, Inc., in payment of invoice no.
2746, less cash discount of $50.00, $2,550.25 ($2,600.25 - $50.00).
Notice that the
discount applies
only to the amount
billed for the
merchandise (2
percent of $2,500)
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Cash Payments on the General Journal
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All expenditures except
Petty Cash expenditures
should be paid for by check.
Thus, a column titled Ck. No.
should be included in the
Cash Payments Journal
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Advantages of Using a Cash Payments Journal
• Transactions generally can be recorded on _____
line.
• All transactions involving _____ to _______ are
recorded in _____ place.
• It eliminates much repetition in posting when there are
numerous transactions involving _______ _____ .
• Special columns can be used for specialized
transactions and posted as one total.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Practice Exercise 6
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