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Transcript of Chapter 14. Retailer – a business that sells to the final user (consumer). Wholesaler – a...
![Page 1: Chapter 14. Retailer – a business that sells to the final user (consumer). Wholesaler – a business that sells to retailers. The Operating Cycle.](https://reader035.fdocuments.in/reader035/viewer/2022062317/5a4d1b647f8b9ab0599af3e9/html5/thumbnails/1.jpg)
Accounting for Sales and Receipts
Chapter 14
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Retailer – a business that sells to the final user
(consumer). Wholesaler – a business that sells to retailers.
The Operating Cycle of a Merchandising Business
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New and Different Accounts Change Fund
Petty Cash Fund Allowance for
Uncollectible Accounts Notes
Receivable/Payable Interest Receivable Merchandise Inventory Prepaid Insurance Delivery Equipment Accumulated
Depreciation
Discount on Notes Payable
Sales Tax Payable Capital Stock Retained Earnings Sales Sales Discount Sales/Purchases Returns
and Allowances Interest Income Purchases Transportation In Purchases Discount
• Bankcard Fees Expense
• Cash Short and Over
• Depreciation Expense
• Insurance Expense
• Interest
Expense• Loss/Gain on
Disposal of Plant Assets
• Uncollectible Accounts Expense Pg 381
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Pg 381
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Merchandise – goods bought for resale. Inventory – merchandise on hand for resale Merchandise Inventory Account –
Asset Account Increased with a debit and decreased with a credit
Sales Account – When a retailer sells goods to a customer the amount of the merchandise sold is recorded in the Sales account. Sales is a revenue account Increase with a credit and decrease with a debit Both cash sales and sales on account are recorded
here
Accounts Used by a Merchandising Business
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Sales on account
Credit cards (store and bank) Sales Slip – a form that lists date of sale, customer account
identification and description, quantity, and price of the items sold. Sales slips are pre-numbered to help businesses keep track of
all sales made on account Sales Tax – most states and some cities tax the retail sale of
goods and services. Sales taxes are periodically sent to the state (or city). Until they
are sent, the business holds them in a Sales Tax Payable account. Credit Terms – The sales slip usually has a spot for credit terms
on it. n/30 means net amount due in 30 days
Analyzing Sales Transactions
Pg 385
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Small businesses with few Accounts
Receivable accounts usually list them individually in the General Ledger. Large businesses with many Accounts Receivable accounts keep a separate Accounts Receivable Subsidiary Ledger with the individual accounts listed and then have an Accounts Receivable (controlling account) listed in the General Ledger that is a total of all individual accounts in the subsidiary ledger.
The Account Receivable Subsidiary Ledger
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Pg 387
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Sales Return – Any merchandise returned for
credit or cash refund Sales Allowance – a price reduction granted
for damaged goods kept by the customer. Credit Memorandum – If the sales return or
allowance occurs on a charge sale, the business usually prepares a credit memo. It lists the details of a sales return or allowance and the customer’s account is credited for the amount returned or allowed.
Sales Returns and Allowances
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• Sales Returns and Allowances Account – decreases the total revenue earned by a business.
• Contra Account – an account that offsets or decreases another account • Sales Returns and Allowances is a contra account
to Sales• Contra accounts have the opposite normal
balance sides as the accounts they offset.
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Journalizing a Return from an On
Account Sale
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Posting to the
Accounts Receivable
Subsidiary Ledger
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Cash Receipt – a transaction in which money is
received by a business. Cash Sales – full payment at the time of sale Charge Customer Payments – When a customer
comes in to pay on their account, the employee prepares a receipt. The receipt number is the source document.
Bankcard Sales – the bank pays the store and then the bank collects at a later date from the customer
Other Cash Receipts – bank loans, sale of assets
Cash Transactions
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Cash discount or Sales discount is the amount a customer can deduct from the amount owed for purchased merchandise if payment is made within a certain time. This is to encourage customers to pay promptly. 2/10, n/30 means 2% discount it paid within 10
days if not the entire amount is due in 30 days.
Cash Discounts
1. Merchandise Sold X Discount Rate = Discount $1500 X .02 = $30
2. Sales Slip Amount - Discount Amount = Amount Paid Within Discount Period $1500 - $30 = $1470
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Payment from a
Charge Customer
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Cash Discount
PaymentsPg 397
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Cash Sales Pg 398
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Bankcard Sales
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Other Sales
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Pg 400