9 - 1© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Special Journals:Special Journals:Sales and Cash ReceiptsSales and Cash Receipts

Chapter 9Chapter 9

9 - 2© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Objective 1Learning Objective 1

Journalizing sales onJournalizing sales on

account in a sales journal.account in a sales journal.

9 - 3© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

Gross salesGross sales= Amount of units sold= Amount of units sold× × Sales price per unitSales price per unit

Gross salesGross sales= Amount of units sold= Amount of units sold× × Sales price per unitSales price per unit

Amount is credited toAmount is credited tothe Revenue account.the Revenue account.Amount is credited toAmount is credited tothe Revenue account.the Revenue account.

Normal balance is a credit.Normal balance is a credit.Normal balance is a credit.Normal balance is a credit.

9 - 4© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)Assume that Chou’s ToyAssume that Chou’s Toy

Shop had $3,000 in sales.Shop had $3,000 in sales.Assume that Chou’s ToyAssume that Chou’s Toy

Shop had $3,000 in sales.Shop had $3,000 in sales.

$1,800 were cash sales$1,800 were cash salesand $1,200 were charges.and $1,200 were charges.

$1,800 were cash sales$1,800 were cash salesand $1,200 were charges.and $1,200 were charges.

A customer received a $10 priceA customer received a $10 pricereduction for defective merchandise.reduction for defective merchandise.

A customer received a $10 priceA customer received a $10 pricereduction for defective merchandise.reduction for defective merchandise.

How can these transactions be recorded?How can these transactions be recorded?How can these transactions be recorded?How can these transactions be recorded?

9 - 5© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

Accounts AffectedAccounts Affected CategoryCategory Rules RulesCashCash AssetAsset Dr. 1,800Dr. 1,800Accounts ReceivableAccounts Receivable AssetAsset Dr. 1,200Dr. 1,200SalesSales RevenueRevenue Cr. 3,000Cr. 3,000

Accounts AffectedAccounts Affected CategoryCategory Rules RulesCashCash AssetAsset Dr. 1,800Dr. 1,800Accounts ReceivableAccounts Receivable AssetAsset Dr. 1,200Dr. 1,200SalesSales RevenueRevenue Cr. 3,000Cr. 3,000

July 18July 18CashCash 1,8001,800Accounts ReceivableAccounts Receivable 1,2001,200

SalesSales 3,000 3,000To record sales for July 18To record sales for July 18

July 18July 18CashCash 1,8001,800Accounts ReceivableAccounts Receivable 1,2001,200

SalesSales 3,000 3,000To record sales for July 18To record sales for July 18

9 - 6© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

Sales returns and allowances Sales returns and allowances ==Amount allowed for defective merchandiseAmount allowed for defective merchandise

Sales returns and allowances Sales returns and allowances ==Amount allowed for defective merchandiseAmount allowed for defective merchandise

Amount is debited in the journal entry.Amount is debited in the journal entry.Amount is debited in the journal entry.Amount is debited in the journal entry.

Normal balance is a debit.Normal balance is a debit.Normal balance is a debit.Normal balance is a debit.

9 - 7© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

Accounts AffectedAccounts Affected CategoryCategory Rules RulesSales Returns andSales Returns and Contra-Contra- Dr. 10 Dr. 10AllowancesAllowances revenuerevenue

Accounts Receivable,Accounts Receivable, AssetAsset Cr. 10 Cr. 10Michelle ReeseMichelle Reese

Accounts AffectedAccounts Affected CategoryCategory Rules RulesSales Returns andSales Returns and Contra-Contra- Dr. 10 Dr. 10AllowancesAllowances revenuerevenue

Accounts Receivable,Accounts Receivable, AssetAsset Cr. 10 Cr. 10Michelle ReeseMichelle Reese

Accounts ReceivableAccounts Receivable1,2001,200 1010

9 - 8© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

What is a sales discount?What is a sales discount?What is a sales discount?What is a sales discount?

It is a percent decrease in the amountIt is a percent decrease in the amountcollected from a credit customer.collected from a credit customer.

It is a percent decrease in the amountIt is a percent decrease in the amountcollected from a credit customer.collected from a credit customer.

9 - 9© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

What is the meaning of the term 2/10, n/30?What is the meaning of the term 2/10, n/30?What is the meaning of the term 2/10, n/30?What is the meaning of the term 2/10, n/30?

It means a customer will be granted a 2%It means a customer will be granted a 2%discount if the account is paid in 10 days.discount if the account is paid in 10 days.It means a customer will be granted a 2%It means a customer will be granted a 2%discount if the account is paid in 10 days.discount if the account is paid in 10 days.

Otherwise, the full amount (n = net)Otherwise, the full amount (n = net)is to be paid in 30 days.is to be paid in 30 days.

Otherwise, the full amount (n = net)Otherwise, the full amount (n = net)is to be paid in 30 days.is to be paid in 30 days.

9 - 10© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

July 24July 24CashCash 39.2039.20Sales DiscountSales Discount .80 .80

Accounts Receivable, Michelle ReeseAccounts Receivable, Michelle Reese 40.0040.00

July 24July 24CashCash 39.2039.20Sales DiscountSales Discount .80 .80

Accounts Receivable, Michelle ReeseAccounts Receivable, Michelle Reese 40.0040.00

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

9 - 11© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-1 (Seller’s Learning Unit 9-1 (Seller’s ViewView

of a Merchandise Company)of a Merchandise Company)

What is sales tax payable?What is sales tax payable?What is sales tax payable?What is sales tax payable?

It is a percent multiplied times the grossIt is a percent multiplied times the grossamount of the sale collected from customers.amount of the sale collected from customers.

It is a percent multiplied times the grossIt is a percent multiplied times the grossamount of the sale collected from customers.amount of the sale collected from customers.

The business has a liability to the taxingThe business has a liability to the taxingauthority for the amounts collected.authority for the amounts collected.

The business has a liability to the taxingThe business has a liability to the taxingauthority for the amounts collected.authority for the amounts collected.

9 - 12© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning ObjectivesLearning Objectives2 and 32 and 3

Posting from a sales journalPosting from a sales journal

to the general ledger.to the general ledger.

Recording to the accountsRecording to the accounts

receivable subsidiary ledgerreceivable subsidiary ledger

from a sales journal.from a sales journal.

9 - 13© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

The The sales journalsales journal records sales of records sales ofmerchandise on account.merchandise on account.

The The sales journalsales journal records sales of records sales ofmerchandise on account.merchandise on account.

The The cash receipts journalcash receipts journal records recordsreceiving cash from any source.receiving cash from any source.

The The cash receipts journalcash receipts journal records recordsreceiving cash from any source.receiving cash from any source.

Learning Unit 9-2Learning Unit 9-2(Special Journals)(Special Journals)

The The purchases journalpurchases journal records buying records buyingmerchandise or other items on account.merchandise or other items on account.The The purchases journalpurchases journal records buying records buying

merchandise or other items on account.merchandise or other items on account.

The The cash payments journalcash payments journal records payments. records payments.The The cash payments journalcash payments journal records payments. records payments.

9 - 14© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-2Learning Unit 9-2(Special Journals)(Special Journals)

Subsidiary LedgerSubsidiary Ledger

A separate record for each creditA separate record for each creditcustomer must be set up.customer must be set up.

A separate record for each creditA separate record for each creditcustomer must be set up.customer must be set up.

9 - 15© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-2Learning Unit 9-2(Special Journals)(Special Journals)

Recorded sales are posted in total to the SalesRecorded sales are posted in total to the Salesaccount and the Accounts Receivable account.account and the Accounts Receivable account.Recorded sales are posted in total to the SalesRecorded sales are posted in total to the Salesaccount and the Accounts Receivable account.account and the Accounts Receivable account.

They are also recorded as debitsThey are also recorded as debitsto individual customer accounts.to individual customer accounts.

They are also recorded as debitsThey are also recorded as debitsto individual customer accounts.to individual customer accounts.

9 - 16© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-2Learning Unit 9-2(Special Journals)(Special Journals)

Sales ReturnsSales Returnsand Allowancesand Allowances

Sales ReturnsSales Returnsand Allowancesand Allowances

Sales DiscountsSales DiscountsSales DiscountsSales Discounts

SalesSalesSalesSales

InventoryInventoryInventoryInventory

AccountsAccountsReceivableReceivable

AccountsAccountsReceivableReceivable

CashCashCashCash

Partial General Ledger

Roe CompanyRoe CompanyRoe CompanyRoe Company

Mel’s Dept. StoreMel’s Dept. StoreMel’s Dept. StoreMel’s Dept. Store

Hal’s ClothingHal’s ClothingHal’s ClothingHal’s Clothing

BevansBevansCompanyCompany

BevansBevansCompanyCompany

Accounts ReceivableSubsidiary Ledger

9 - 17© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Objective 4Learning Objective 4

Preparing, journalizing,Preparing, journalizing,

recording, and postingrecording, and posting

a credit memorandum.a credit memorandum.

9 - 18© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-3Learning Unit 9-3(The Credit Memorandum)(The Credit Memorandum)

What is a credit memorandum?What is a credit memorandum?What is a credit memorandum?What is a credit memorandum?

It shows amounts that were deductedIt shows amounts that were deductedfrom the balance the customer owes.from the balance the customer owes.It shows amounts that were deductedIt shows amounts that were deductedfrom the balance the customer owes.from the balance the customer owes.

They are contra-revenue accountsThey are contra-revenue accountswith a normal debit balance.with a normal debit balance.

They are contra-revenue accountsThey are contra-revenue accountswith a normal debit balance.with a normal debit balance.

These are recorded in the general journalThese are recorded in the general journaland posted to a subsidiary ledger.and posted to a subsidiary ledger.

These are recorded in the general journalThese are recorded in the general journaland posted to a subsidiary ledger.and posted to a subsidiary ledger.

9 - 19© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-3Learning Unit 9-3(The Credit Memorandum)(The Credit Memorandum)

Sales Returns andSales Returns and Credit Credit Account PR Account PR Allowances – Dr.Allowances – Dr.DateDate Memo No. Memo No. Credited Credited Accts. Rec. – Cr.Accts. Rec. – Cr.200x200xApril 12 1 BevansApril 12 1 Bevans 600.00 600.00

Sales Returns andSales Returns and Credit Credit Account PR Account PR Allowances – Dr.Allowances – Dr.DateDate Memo No. Memo No. Credited Credited Accts. Rec. – Cr.Accts. Rec. – Cr.200x200xApril 12 1 BevansApril 12 1 Bevans 600.00 600.00

9 - 20© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Objective 5Learning Objective 5

Journalizing and postingJournalizing and posting

transactions using a cashtransactions using a cash

receipts journal, as wellreceipts journal, as well

as recording to the accountsas recording to the accounts

receivable subsidiary ledger.receivable subsidiary ledger.

9 - 21© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-4Learning Unit 9-4(Cash Receipts Journal)(Cash Receipts Journal)

The cash receipts journal recordsThe cash receipts journal recordsthe receipt of cash from any source.the receipt of cash from any source.

The cash receipts journal recordsThe cash receipts journal recordsthe receipt of cash from any source.the receipt of cash from any source.

The number of columnsThe number of columnsvaries with each business.varies with each business.

The number of columnsThe number of columnsvaries with each business.varies with each business.

The cash receipt journalThe cash receipt journalspeeds up the posting process.speeds up the posting process.

The cash receipt journalThe cash receipt journalspeeds up the posting process.speeds up the posting process.

9 - 22© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Learning Unit 9-4Learning Unit 9-4(Cash Receipts Journal)(Cash Receipts Journal)

DebitDebit ColumnColumnCashCash

Sales DiscountSales Discount

DebitDebit ColumnColumnCashCash

Sales DiscountSales Discount

Credit ColumnCredit ColumnAccounts ReceivableAccounts Receivable

SalesSalesSundrySundry

Credit ColumnCredit ColumnAccounts ReceivableAccounts Receivable

SalesSalesSundrySundry

9 - 23© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

End of Chapter 9End of Chapter 9