CHAPTER ELEVEN

2. CHAPTER ELEVEN INTRODUCTION TO MERCHANDISING BUSINESSES: SALES

3. INTRODUCTION TO MERCHANDISING BUSINESSES: SALES Objectives: 1. Describe the difference between cash, charge account, and credit card sales. 2. Compute sales tax. 3. Use credit terms. 4. Compute the cash discount and amount of payment due on an invoice. 5. Apply the procedure for handling sales returns and allowances.

4. Selling at Retail • Cash Sales • Charge Sales • Credit Card Sales • Sales Tax

5. Selling at Wholesale • Most selling at the wholesale level is done on credit through the use of invoices.

6. Credit Terms • Credit terms listed on the invoice tell when the customer must pay for the goods.

7. Credit Terms 2/10, n/30 means: A cash discount of 2% is allowed if paid within 10 days. If not, the balance is due within 30 days.

8. Sales Returns and Allowances • Sometimes a customer will return merchandise or request an allowance. The procedure for handling returns and allowances on credit sales involves the use of a credit memorandum or credit slip listing the details of the credit

9. Accounting Terminology • Allowance • Cash discount • Charge accounts • Credit cards • Credit memorandum • Inventory • Invoice • Merchandise • Merchandising business • Retailers • Sales returns and allowances • Sales slip • Sales tax • Source documents • Statement of account • Wholesalers

10. Chapter Summary • Amerchandising businessearns its revenue by selling merchandise (goods) that it has purchased. Merchandising businesses are usually eitherwholesalersorretailers.

11. Chapter Summary (continued) • Someretailerssell only for cash, and others sell both for cash and on credit.Charge accountsand credit cardsare two common types of credit used in retail stores.Wholesalersmake most of their sales on credit.

12. Chapter Summary (continued) • When sales are made,merchandising businessesmust record information about them on source documents. Retailers prepare cash register tapes andsales slips.Wholesalersprepare invoices. Aninvoiceis a bill for the merchandise.

13. Chapter Summary (continued) • States, cities, and counties may impose asales tax. The retailer collects this tax from customers and periodically remits it to the appropriate governmental agency.

14. Chapter Summary (continued) • Wholesalers often include acash discountin their credit terms to encourage early payment. This discount is deducted from the invoice total if payment is made within a specified number of days.

15. Chapter Summary (continued) • When a customer returns merchandise that was sold on credit or receives an allowance on such merchandise, acredit memorandum, orcredit slip, is issued.

16. Topic Quiz Answer the following true/false questions: 1. When an invoice reads 2/10 it means that the customers can get a 2% discount if the bill is paid within 10 days. TRUE TRUE 2. N/30 means that the balance is due at the end of thirty days. 3. Companies may choose whether or not to charge sales tax. FALSE

17. Investigating on the Internet As a research assignment, access a business website and report sources of information that might related to merchandising businesses.

18. 3. Companies may choose whether or not to charge sales tax. FALSE If the state in which the business is operating has a sales tax, then sales taxes must be charged for each transaction. (Return to Topic Quiz)