College Accountingch10

Heintz & Parry
Chapter
20th Edition
10
College
Accounting
Accounting for Sales

and Cash Receipts
Merchandising Business
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
Issued by the seller indicating the customers

accounts receivable account has been credited for
the amount of a:
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

PR DEBIT CREDIT
100 00
100 00
DATE
1
2
3
4
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

PR DEBIT CREDIT
100 00
DATE
1
2
3
4
8
9
8
9
10
11
10
11

DATE
1
2
3
DESCRIPTION
DESCRIPTION
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
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

DATE
DESCRIPTION
PR DEBIT CREDIT
105 00
Cash
1
2
3
4

DATE
8
9
8
9
10
11
10
11

DATE
1
2
3
4
DESCRIPTION
PR DEBIT CREDIT
105 00
Sales
100 00

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
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
DESCRIPTION
5 00
Sales Return Journal Entry

DATE
1
2
3
4
DR.
CR.
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).

DATE
1
2
3
4
DESCRIPTION
PR DEBIT CREDIT
Sales Returns and Allowances
40 00
DATE
1
2
3
4
8
9
8
9
10
11
10
11

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 Tax Payable
DESCRIPTION
PR DEBIT CREDIT
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
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

DATE
1
2
3
4
DESCRIPTION
PR DEBIT CREDIT
100 00
100 00
Sales
Made sale on account
DATE
8
9
8
9
10
11
10
11

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
Received cash on account
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:
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

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

1
2
3
4
DATE
DESCRIPTION
Sales
PR
122
DEBIT CREDIT
1,596 00
Sales Tax Payable
1,520 00
76 00
Sale No. 133C

1
2
3
4
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
BALANCE
1
2
3
1,596
Address: 5240 Tousley Court, Indianapolis, IN 46224-5678
DATE
DESCRIPTION
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

AllowancesGeneral 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
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

1
2
3
4
5

DATE
DESCRIPTION
PR DEBIT CREDIT
20-40 00
May 5 Sales Returns and Allowances 401.1
2 00
Sales Tax Payable
42 00
1
2
3
4
5
Credit Memo #72
8
9
8
9
10
11
10
11

1
2
3
4
5
DATE
DESCRIPTION
PR DEBIT CREDIT
20-40 00
Sales Tax Payable
231
2 00

122/
42 00
Credit Memo #72
1
2
3
8
9
8
9
10
10
11
11
Posting Cash Receipts To The General

Journal
DATE
DESCRIPTION
20-Apr.14 Cash
Accts. Rec./E. Lorenzo
PR
DEBIT CREDIT
1,596 00
1,596 00
5
6
PR DEBIT CREDIT
101 1,596 00
1,596 00
42 00
DATE
DESCRIPTION
20-Apr.14 Cash

Credit Memo #72
Posting Cash Receipts To The General

Journal
1
2
3
4
DATE
DESCRIPTION
PR DEBIT CREDIT
20-40 00
Sales Tax Payable
2 00
231
Posting Cash Reciepts To The General

Journal
1
2
3
4
8
9
8
9
10
11
10
11
DATE
DESCRIPTION
20-Apr. 14 Cash
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 merchandisers 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

1
2
3
DATE
DESCRIPTION
May 6 Cash
Bank Credit Card Expense
PR
DEBIT CREDIT
100 80
4 20

1
2
3
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.

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Heintz & Parry

Accounting for Sales

Sells to final consumers

Purchases merchandise from the manufacturer

Cash register tape

A sales invoice is generated for each sale

One is sent to the customer as a bill for the

Issued by the seller indicating the customers

Describe and use

Price reduction granted by the seller because of

One copy of the credit memo is sent to the

One copy is sent to accounting

Merchandise Sales Accounts

SALES TAX PAYABLE

Cash Sale Journal Entry

Cash Sale Journal Entry

Credit Sale Journal Entry

Credit Sale Journal Entry

Credit Sale Journal Entry

Sales Tax Payable Account

Made credit sale

SALES TAX PAYABLE

Cash Sale Journal Entry

Sales Tax Payable Account

SALES TAX PAYABLE

Cash Sale Journal Entry

Cash Sale Journal Entry

Cash Sale Journal Entry

Credit Sale Journal Entry

Sales Tax Payable

Sales Returns And Allowances Account

Sales Tax Payable

Sales Return Journal Entry

Sales Return Journal Entry

Sales Return Journal Entry

Sales Return Journal Entry

Accts. Receivable/S. Chang

Sales Tax Payable

Sales Discounts Account

A CONTRA-REVENUE account used to record

Sales Discounts Journal Entry

3/10 eom, n/60

Sales Discounts Journal Entry

Sales Discounts Journal Entry

Sales Discounts Journal Entry

Sales Discounts On The Income Statement

Less: Sales returns and allowances

Sales Discounts On The Income Statement

Posting To The General Ledger

Accounts Receivable Ledger

In the general ledger account:

Enter the date.

Step 5: Enter the ledger account number in the PR

Posting To The Accounts

Posting Sales To The General Journal

In the accounts receivable ledger account:

A separate subsidiary ledger

Enter the date.

Step 5: Enter a slash (/) followed by a check mark ()

Sales Tax Payable

Sale No. 133C

Posting Sales To The General Journal

Posting Sales To The General Ledger

Account No. 122