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Accounting for Sales and Cash Receipts

Accounting for Sales and Cash Receipts. Chapter 14. Accounting for a Merchandising Business. Now, instead of selling services, we are selling goods. Retailer – sells to the final consumer Wholesaler – sells to retailers Merchandise – goods bought for resale

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Accounting for Sales and Cash Receipts

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  1. Accounting for Sales and Cash Receipts Chapter 14

  2. Accounting for a Merchandising Business • Now, instead of selling services, we are selling goods. • Retailer – sells to the final consumer • Wholesaler – sells to retailers • Merchandise – goods bought for resale • Inventory – items of merchandise the business has in stock

  3. Accounting for a Merchandising Business Merchandise Inventory Sales D + NB C - D - C + NB Shows inventory Shows merchandise sold REVENUE ACCOUNT Use for both cash and on account

  4. Analyzing Sales Transactions • Sale on account – sale of merchandise that will be paid at a later date • Charge customer – sale on account is made to use credit cards issued by the business • The “n” stands for the net, or total, amount of the sale. • The “30” stands for the number of days the customer has to pay for the merchandise.

  5. The Sales Slip • A sales slip lists the details of a sale: • The date of the sale. • The name of the customer. • The description, quantity, and price of the item(s) sold.

  6. Analyzing Sales Transactions • Sales Tax – tax the retail sale of goods and services • Percentage • Paid by the customer, collected by the business • Liability until paid • Selling price X Sales tax rate $200 X 6% = $12 Sales Tax Payable D - C + NB

  7. Analyzing Sales Transactions • Accounts Receivable Ledger – Contains accounts for charge customers. • Subsidiary Ledger – contains detailed data summarized to a controlling account in the general ledger. • A/R is the controlling account because its balance equals the total of all account balances in the A/R ledger.

  8. Analyzing Sales Transactions • 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 – lists the details of a sales return or allowance. • THESE DECREASE TOTAL REVENUE EARNED BY A BUSINESS!!! • CONTRA ACCOUNT – balance decreases the balance of its related account Sales Returns and Allowances D + NB C -

  9. On December 4 On Your Mark issued Credit Memorandum 124 to Gabriel Ramos for the return of merchandise purchased on account, $150 plus $9 sales tax.

  10. Analyzing Cash Receipt Transactions • Cash Receipt – a transaction in which money comes into a business • Payments from charge customers • Cash sales • Bank card sales • Cash Sale Transaction – the business receives full payment for the merchandise sold at the time of the sale. • Cash register tape • One roll tears off for the customer • Other roll is kept for business • Cash discount or sales discount – the amount a customer can deduct from the amount owed. • 2/10, net/30

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