Accounting for Sales

2. Accounting for Sales • Service Business • provides service for a fee • Merchandising Business • buys goods, then resells for profit

3. Two Types of Merchandisers • Retailer • sells to the final user • Wholesaler • sells to retailers

4. Operating Cycle of a Merchandiser • Purchase of Goods for Resale • Sale of Goods • for cash • on Account • Receive Cash • profit • pay expenses

5. Merchandise Inventory Account • Merchandise • goods bought for resale • Inventory • merchandise that is in stock • Merchandise Inventory • asset account that is adjusted only at the end of the period

6. Sales • revenue account that is credited when merchandise is sold •  if cash sale • Dr. Cash in Bank and Cr. Sales • if sale on account • Dr. A/R and Cr. Sales

7. Problem 14-1 • Apr. 4: • Sold cameras on account for $3,000, Sales Slip 224 • Apr. 10: • Sold photo albums for $150 cash, Sales Slip 225 • Apr. 20: • Sold rolls of film for $24 cash, Sales Slip 226 • Apr. 25: • Sold camera for $380 cash, Sales Slip 227

8. Analyzing Sales Transactions • The most frequent transactions in a merchandising business • cash sale of merchandise • retailers • sale of merchandise on account • wholesalers and manufacturers

9. Sale on Account • sale of merchandise that will be paid for later • (aka: charge sale, credit sale)

10. Charge Customer • the person to whom a charge sale is made

11. Credit Cards • issued by business to charge customers • for making purchases on account • Sears, Macy’s, Mobil

12. Bank Cards • issued by a bank to individuals to make purchases • treat like cash • bank pays business right away • Visa, MasterCard

13. The Sales Slip • form that lists details of credit sale • source document for transaction • pre-numbered slips help businesses stay organized

14. Sales Tax Payable Account • most states and some cities tax retail sales • tax paid by customer, collected by business, & forwarded to government • collected sales taxes are liabilities • some entities (like schools) are exempt from sales tax

15. Credit Terms • state time allowed for payment (and the discount period) • 2/10 n/30 • if paid within 10 days, receive a 2% discount, otherwise due within 30 days 

16. Accounts Receivable • Few Customers • individual A/R account for each customer • Many Customer • one controlling A/R account with details in a subsidiary ledger

17. Subsidiary Ledger • book that contains details of a controlling account 

18. Controlling Account • its balance equals the total of all the balances in the subsidiary ledger

19. Accounts Receivable Subsidiary Ledger • lists all customers and what they owe •  Accounts Receivable • Controlling Account shows the total of what is owed (no details)

20. Sold merchandise on account to C. Klein for $200 plus 6% sales tax.

21. Sales Returns and Allowances • Some customers are dissatisfied. • Sales Return • merchandise returned for credit or cash • Sales Allowance • price reduction for damaged goods kept by customer • Credit Memo • lists details of sales return or allowance andthe charge customer’s A/R is credited

22. Sales Returns and Allowances Account •  contra account • balance offsets the balance of the Sales account •  used to help identify any issues

23. Cash Transactions • Cash Sale • Debit Cash • Credit Sales and Sales Tax Payable • source document • receipt • register tape

24. Cash Transaction • Bankcard Sale • Debit Cash • Credit Sales and Sales Tax Payable • Source Document • Bankcard Slip • Register Tape

25. Cash Transaction • Charge Customer Payments • Debit Cash • Credit Accounts Receivable • Source Document • Receipt

26. Cash Transactions • Loan Proceeds • Debit Cash • Loan Payable • Asset Sale • Debit Cash • Credit Asset

27. Cash Discount • aka Sales Discounts • encourage prompt payment • based on credit terms • Debit Cash • Debit Sales Discounts • Debit Sales Tax Payable • Credit Accounts Receivable