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LESSON 10-1

LESSON 10-1. Journalizing Sales on Account. QUESTIONS:. Two main activities of a merchandising business? Purchase of merchandise Sale of merchandise Person or business to whom merchandise is sold? Customer. HOBBY SHACK:. Merchandising business. State Government.

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LESSON 10-1

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  1. LESSON 10-1 Journalizing Sales on Account

  2. QUESTIONS: • Two main activities of a merchandising business? • Purchase of merchandise • Sale of merchandise • Person or business to whom merchandise is sold? • Customer

  3. HOBBY SHACK: Merchandising business State Government • When you purchase something, what is included on the price? • Item + tax = Total Price • Who collects tax amount? • Who is the tax given to? • Customers: • Individuals buying product – pay sales tax • Schools – tax exempt • Churches – tax exempt

  4. Sale on Account • Hobby Shack allows Sales on Account only to businesses • All others pay cash or use a credit card (like cash) LESSON 10-1

  5. SPECIAL JOURNALS • purchase merchandise on account • all cash payments • all sales of merchandise on account • all transactions where cash received • Transactions that don’t qualify for other 4 • Five Special Journals used by Hoppy Shack: • Purchases Journal – • Cash Payments Journal – • Sales Journal – • Cash Receipts Journal – • General Journal –

  6. SALES ON ACCOUNT • What accounts are impacted by Sales on Account? • Accounts Receivable (1130) • Is this an Asset, Liability, or Owner’s Equity? • Sales (4110) • Is this an Asset, Liability, or Owner’s Equity? • Temporary account closed to Owner’s Equity • What new Sales accounts appear on the Chart of Accounts? • Sales Discount • Sales Returns and Allowance • Sales Tax Payable – New Liability Account

  7. SALES TAX • Sales Tax: • A tax on the sale of merchandise or services • Stated as a percentage of sales • Paid by customer, collected by businesses • Businesses file reports and pay collected tax amount to gov’t • Requires separate records of total sales and total tax collected • Sales Tax Payable Account • Account used to track tax collected and paid • Amount of Sales Tax collected is owed to Government • A liability is something you owe (payable means will pay later) • What is the Normal Balance? • Credit = Amount you collected and owe - increases as a Credit • When you pay it to the government = decrease as a debit

  8. SALES JOURNAL • Three special columns • Track all Sales on Account • Sales invoice = source document • Gross sale + sales tax amount = invoice total • Sales invoice maintained by the seller • Purchase invoice given to the customer

  9. Calculating Sales Tax $48 $848 • Sales on Account = $800, tax is 6% • What is the sales tax amount? • What is the total sales/invoice amount?

  10. SALES INVOICE

  11. SALES OF MERCHANDISE ON ACCOUNT September 1. Sold merchandise on account to Village Crafts, $540.00, plus sales tax, $32.40; total, $572.40. Sales Invoice No. 103. Accts. Rec/Village Crafts Sales Tax Payable Sales • What accounts are impacted and how? • Accounts Receivable: increases as ? • Sales Tax Payable: increases as ? • Sales: increases as ?

  12. SALE ON ACCOUNT September 1. Sold merchandise on account to Village Crafts, $540.00, plus sales tax, $32.40; total, $572.40. Sales Invoice No. 103. Accts. Rec/Village Crafts 572.40 Sales Tax Payable 32.40 Sales 540.00

  13. TOTALING, PROVING, AND RULING A SALES JOURNAL Why do some sales not have Sales Tax? Prove and rule at the end of pages and months

  14. TERMS REVIEW • customer • sales tax • sales journal

  15. Work Together Work Together 10-1

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