1. DEPARTMENTAL SALES ON ACCOUNT Sales transactions need to be recorded by department so that managers can evaluate each department’s profitability MasterSport’s state requires we collect a 5% sales tax Exempt from paying a sales tax: Many agencies supported by local and state government Charitable institutions Agencies that the government wants to promote Nonprofit educational institutions Lesson 2-1, page 40

2. GAAP–GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Objective Evidence: A source document is prepared for each transaction. The source document is the original business paper indicating that the transaction did occur and that the amounts recorded in the accounting records are accurate and true. (Original goes to customer – Copy is kept as a record) Realization of Revenue: Revenue is recorded (realized – made real) at the time goods or services are sold, regardless of when the business actually receives cash. Lesson 2-1, page 40 Adequate Disclosure: Financial Statements contain all information necessary to understand a business’ financial condition.

3. Lesson 2-1, page 41 JOURNALIZING SALES ON ACCOUNT June 1. Sold golf equipment on account to Golden Golf League, $280.00, plus sales tax, $14.00; total, $294.00. Sales Invoice No. 101. 5.Write the sales tax payable amount. $280 x.05 = $14.00 5 1.Write the date. 1 3.Write the sales invoice number. 3 4.Write the total invoice amount. We need to RECEIVE the entire amount 4 2.Write the customer name. 2 6.Write the sales amount. The worth of the merchandise 6

4. Lesson 2-1, page 42 POSTING FROM A SALES JOURNAL TO THE ACCOUNTS RECEIVABLE LEDGER 5.Write customer number in Post. Ref. column of sales journal. 5 1.Write date. 1 3.Enter amount of debit column. 3 4.Enter account balance. 4 2.Write sales journal page. 2 **Customer and Vendor accounts must be posted frequently

5. Lesson 2-1, page 43 POSTING FROM A SALES JOURNAL TO A GENERAL LEDGER ACCOUNT 1.Write date. 1 3.Enter debit amount. 3 2.Write sales journal page. 2 5.Write general ledger account number in parentheses. 5 4.Enter account balance. 4 **Proved and ruled at the end of each month or the bottom of the page

6. ISSUING A CREDIT MEMORANDUM Merchandising businesses normally have some merchandise returned… wrong size wrong style broken missing parts Customers may receive credit on account or a cash refund If they already paid, we have to pay them back If they haven’t paid yet, we can credit their account, lowering the amount they owe us Credit Memorandum – form prepared by the vendor showing the amount deducted for returns and allowances **an allowance is when we reduce A/R without an actual return… Example…we sent less than they ordered Lesson 2-1, page 44

7. Galaxy Tennis Club for tennis equipment returned, $130.00, plus sales tax, $6.50, from Sales Invoice No. 100; total, $136.50. Credit Memorandum No. 43. Lesson 2-1, page 45 JOURNALIZING SALES RETURNS AND ALLOWANCES CREDIT MEMORANDUM NO. 43 MasterSport 4750 Appian Way San Jose, CA 95125-0210 June 2, 20-- TO Galaxy Tennis Club 21 Beach View Rd. San Jose, CA 95021-1168 ACCOUNT NO. 130 DATE QUANTITY 21 DESCRIPTION Tennis equipment, Invoice No. 100 Sales tax PRICE 130.00 6.50 TOTAL 136.50 5.Enter sales tax debit. 5 1.Write the date. 1 3.Write credit memo number. 3 4.Enter credit amount. 4 2.Write customer name. 2 6.Enter debit amount in correct column. 6 Contra Revenue Account

8. Lesson 2-1, page 46 POSTING FROM A SALES RETURNS AND ALLOWANCES JOURNAL 2.Post column totals to correct accounts in the general ledger. 1 2 1.Post individual entries to accounts receivable ledger.

9. WT

10. OYO

11. OYO A/R Ledger Balances: Brein = 161.00 Lockhart = 136.00 Muller = 48.50 Western = 220.00

12. DEPARTMENTAL CASH RECEIPTS Sales discount: deduction that a vendor allows on the invoice amount to encourage prompt payment; aka cash discount MasterSport terms: 2/10, n/30 2% discount allowed if paid within 10 days All sales on account must be paid within 30 days 3 amounts must be calculated when cash is received on account within a discount period 1.sales discount 2.reduction in sales tax payable (only seller does tax) 3.cash received When we receive cash on account, we prepare a receipt as the source document (O.E.) Lesson 2-2, page 48

13. CASH RECEIPTS WITH A SALES DISCOUNT Lesson 2-2, page 48 June 1. Received cash on account from Par Golf Club, $1,749.30, covering Sales Invoice No. 96 for golf equipment for $1,785.00 ($1,700.00 plus sales tax, $85.00), less 2% discount, $34.00, and less sales tax, $1.70. Receipt No. 89. Sales Discount: Sales Invoice Amount (S96)Sales DiscountSales Discount Rate  = $1700.00  2% = $34.00 –  5% = $1.70 $1749.30 = $1785.00 Sales tax liability reduction: Sales DiscountSales Tax ReductionSales Tax Rate  = Cash received: Total Invoiced AmountCash ReceivedSales Discount – Sales Tax Reduction – = $1.70 –

14. Lesson 2-2, page 49 June 1. Received cash on account from Par Golf Club, $1,749.30, covering Sales Invoice No. 96 for golf equipment for $1,785.00 ($1,700.00 plus sales tax, $85.00), less 2% discount, $34.00, and less sales tax, $1.70. Receipt No. 89. 5.Write the sales tax debit amount. 5 1.Write the date. 1 3.Record the receipt number. 3 4.Write the accounts receivable credit amount. 4 2.Write the customer name. 2 7.Write the cash debit amount. 7 6.Write the sales discount debit amount. 6 Total that we thought we were receiving before 34.00 x 5% = 1.70 (don’t pay tax on the discount) 1,700.00 x 2% = 34.00 Credits – Debits…what you actually get JOURNALIZING A CASH RECEIPT WITH A SALES DISCOUNT

15. JOURNALIZING A CASH RECEIPT WITH A SALES RETURN AND A SALES DISCOUNT Lesson 2-2, page 50 Sales Discount: Sales Invoice AmountSales DiscountSales Discount Rate  = $425.00  2% = $8.50 –  5% = $0.43 $437.32 = $446.25 Sales tax payable reduction: Sales DiscountSales Tax Payable ReductionSales Tax Rate  = Cash received: Total Sales Amount After Return Cash ReceivedSales Discount – Sales Tax Reduction – = $0.43 – June 8. Received cash on account from Eastside Sports Center, $437.32, covering Sales Invoice No. 97 for $525.00 ($500.00 plus sales tax, $25.00), less Credit Memorandum No. 42 for $78.75 ($75.00 plus sales tax, $3.75), less 2% discount, $8.50, and less sales tax, $0.43. Receipt No. 92. Amount of Sale Sales TaxTotal Receivable $500.00$25.00$525.00 - 75.00- 3.75- 78.75 $425.00 $21.25$446.25 Original Sales Invoice Amount Sales Return Sales Invoice amount after return

16. Lesson 2-2, page 50 JOURNALIZING A CASH RECEIPT WITH A SALES RETURN AND A SALES DISCOUNT June 8. Received cash on account from Eastside Sports Center, $437.32, covering Sales Invoice No. 97 for $525.00 ($500.00 plus sales tax, $25.00), less Credit Memorandum No. 42 for $78.75 ($75.00 plus sales tax, $3.75), less 2% discount, $8.50, and less sales tax, $0.43. Receipt No. 92. 5.Write the sales tax payable debit amount. 5 1.Write the date. 1 3.Record the receipt number. 3 4.Write the accounts receivable credit amount. 4 2.Write the customer name. 2 7.Write the cash debit amount. 7 6.Write the sales discount debit amount. 6

17. Lesson 2-2, page 51 JOURNALIZING CASH AND CREDIT CARD SALES 5.Enter sales tax payable credit amount. 5 1.Write the date. 1 3.Record cash register tape number. T + date 3 4.Place a check mark in Post. Ref. column. 4 2.Place check mark in Account Title column. 2 7.Enter the cash debit amount. 7 June 11. Recorded cash and credit card sales, golf equipment, $4,370.00; tennis equipment, $6,280.00; plus sales tax, $532.50; total $11,182.50. Cash Register Tape No. 11. 6.Enter sales credit amount for each department. 6

18. Lesson 2-2, page 52 POSTING FROM THE CASH RECEIPTS JOURNAL 2.Column totals are posted to the account named in the column heading. 2 1.Individual amounts are posted to the accounts receivable ledger. 1

19. ORDER OF POSTING FROM JOURNALS Lesson 2-2, page 53 Transactions affecting vendor and customer accounts are posted often during the month…kept up to date General Ledger account balances are needed only for financial statements…less frequently ALL transactions must be posted at the end of a fiscal period 1.Sales Journal 2.Sales Returns and Allowances Journal 3.Purchases Journal 4.Purchases Returns and Allowances Journal 5.General Journal 6.Cash Receipts Journal 7.Cash Payments Journal Suggested order – keeps the transactions in order in ledgers **Must do in this order on test

20. Work Together 2-2 (p54, wb33-36) & On Your Own 2-2 (p54, wb33-36) Work Together 2-2 (p54, wb33-36) & On Your Own 2-2 (p54, wb33-36)

21. GL balances after posting OYO: Cash = 70,109.88 (dr.) Accounts Receivable = 810.90 (dr.) Sales Tax Payable = 5198.08 (cr.) Sales – Furniture = 11799.00 (cr.) Sales – Carpeting = 10398.00 (cr.) Sales Discount – Furniture = 26.00 (dr.) Sales Discount – Carpeting = 36.40 (dr.) A/R Ledger account Joan Seymour = -0- A/R ledger balances after posting WT: Mona Andrews Design = 141.00 (dr.) Bob Smits = 217.20 (dr.) 2000 - 180 = 1820 (actual purchase) 1820 x.02 = 36.40 (discount) 36.40 x.06 = 2.184 (tax reduction) 1890.62 + 36.40 (discount) + 2.18 (tax reduction) = 1929.20 what we give her credit for