2. A wholesaler sells to retailers, and a retailer sells to the final users. In addition to using the general ledger, a business keeps a subsidiary ledger of individual customer accounts. Merchandising businesses receive cash from cash sales, payments on account, bankcard sales, and occasionally from other types of transactions
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

3. Explain the difference between a retailer and a wholesaler.
Explain the difference between a service business and a merchandising business.
Explain the difference between a retailer and a wholesaler.
Analyze transactions relating to the sale of merchandise.
Record sales and cash receipt transactions in a general journal.
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

4. Key Terms retailer wholesaler merchandise inventory sales
Accounting for a Merchandising Business
Section 14.1
Key Terms
retailer
wholesaler
merchandise
inventory
sales
Glencoe Accounting

5. The Operating Cycle of Merchandising Business
Accounting for a Merchandising Business
Section 14.1
Retailers
Most merchandising businesses are both
Wholesalers
retailer
A business that sells to the final user, the consumer.
wholesaler
A business that sells to the retailers.
Glencoe Accounting

6. The Operating Cycle of a Merchandising Business
Accounting for a Merchandising Business
Section 14.1
See page 383
Glencoe Accounting

7. Accounts Used by a Merchandising Business
Accounting for a Merchandising Business
Section 14.1
A merchandising business buys merchandise from a wholesaler or manufacturer.
A merchandising business sells goods to its customers.
merchandise
Goods bought to resell to customers.
A merchandising business keeps an inventory.
inventory
The items of merchandise a business has in stock.
Glencoe Accounting

8. Accounts Used by a Merchandising Business
Accounting for a Merchandising Business
Section 14.1
Inventory is represented in the general ledger by the asset account Merchandise Inventory.
The normal balance of this account is a debit.
Merchandise Inventory Account
Merchandise is bought and sold during the operating cycle.
The purchase and sale of merchandise is recorded in separate accounts.
Glencoe Accounting

9. Accounts Used by a Merchandising Business
Accounting for a Merchandising Business
Section 14.1
The amount of the merchandise sold is recorded in the sales account.
Increases to sales are recorded as credits.
Sales Account
The normal balance of the sales account is a credit.
Sales on account affect the Accounts Receivable account and cash sales affect the Cash in Bank account.
sales
A revenue account to record the amount of the merchandise sold.
Glencoe Accounting

10. Key Terms sale on account charge customer credit card sales slip
Analyzing Sales Transactions
Section 14.2
Key Terms
sale on account
charge customer
credit card
sales slip
sales tax
credit terms
accounts receivable subsidiary ledger
subsidiary ledger
controlling account
sales return
sales allowance
credit memorandum
contra account
Glencoe Accounting

11. A sale on account is made to a charge customer.
Sales on Account
Analyzing Sales Transactions
Section 14.2
A sale on account is made to a charge customer.
sale on account
The sale of merchandise that will be paid for at a later date.
charge customer
A customer to whom a sale on account is made.
Glencoe Accounting

12. A store credit card facilitates sales on account.
Analyzing Sales Transactions
Section 14.2
A store credit card facilitates sales on account.
credit card
A card issued by a business containing a customer’s name and account number that facilitates the sale on account.
Glencoe Accounting

13. Sales on Account A charge sale involves: sales slip sales tax
Analyzing Sales Transactions
Section 14.2
sales slip
A form that lists the details of a sale.
A charge sale involves:
sales tax
A tax levied by a city or state on the retail sale of goods and services.
sales slip
sales tax
credit terms
Terms that state the time allowed for payment for a sale on account.
credit terms
Glencoe Accounting

14. Sales on Account Items on a sales slip include: Date of the Sale
Analyzing Sales Transactions
Section 14.2
Date of the Sale
Items on a sales slip include:
Customer account identification
Description, quantity, and price of items sold
There are usually multiple copies of the sales slip with at least one for the customer and one for accounting purposes.
Glencoe Accounting

15. Sales on Account Sales Tax
Analyzing Sales Transactions
Section 14.2
Sales Tax
A business periodically sends the collection of sales tax to the state. Until then, the amount owed is recorded in a liability account called Sales Tax Payable.
Sold $700 merchandise. Sales tax is 6%. How much sales tax should you collect?________
What is the amount total due? ____________
Glencoe Accounting

16. Net amount must be paid in
Sales on Account
Analyzing Sales Transactions
Section 14.2
The credit terms are listed on the sales slip.
What does n/30 mean?
Net amount must be paid in
30 days.
See page 388
Glencoe Accounting

17. The Accounts Receivable Subsidiary Ledger
Analyzing Sales Transactions
Section 14.2
What is the accounts receivable subsidiary ledger?
accounts receivable subsidiary ledger
A separate ledger that contains accounts for each charge customer; it is summarized in the Accounts Receivable controlling account in the general ledger.
Glencoe Accounting

18. The Accounts Receivable Subsidiary Ledger
Analyzing Sales Transactions
Section 14.2
See page 389
controlling account
An account that serves as a control on the accuracy of the account balances in the subsidiary ledger; its balance must equal the total of all account balances in the subsidiary ledger.
Glencoe Accounting

19. The Accounts Receivable Subsidiary Ledger
Analyzing Sales Transactions
Section 14.2
Subsidiary Ledger Account Form
See page 389
subsidiary ledger
A ledger with detailed data that is summarized in a controlling account in the general ledger.
Glencoe Accounting

20. Recording Sales on Account
Analyzing Sales Transactions
Section 14.2
Recorded at the time of sale
Recording a sale on account
Revenue must be realizable
Glencoe Accounting

21. Recording Sales on Account
Analyzing Sales Transactions
Section 14.2
Business Transaction
On December 1 The Starting Line sold merchandise on account to Casey Klein for $200 plus sales tax of $12, Sales Slip 50.
See page 390
Glencoe Accounting

22. Recording Sales on Account
Analyzing Sales Transactions
Section 14.2
Business Transaction
On December 3 The Starting Line sold merchandise on account to South Branch High School Athletics for $1,500, Sales Slip 51.
Why no tax? Schools are tax exempt
See page 391
Glencoe Accounting

23. Recording Sales on Account
Analyzing Sales Transactions
Section 14.2
A merchant performs a sales return for customers who are unhappy with their purchases.
A sales allowance may be issued by the merchant if merchandise is damaged prior to purchase.
sales allowance
A price reduction granted for damaged goods kept by the customer.
sales return
Any merchandise returned for credit or a cash refund.
Glencoe Accounting

24. Recording Sales on Account
Analyzing Sales Transactions
Section 14.2
The Sales Returns and Allowances account is a contra account.
contra account
An account whose balance is a decrease to its related account.
Glencoe Accounting

25. Recording Sales on Account
Analyzing Sales Transactions
Section 14.2
Sometimes a cash refund is given and the Cash in Bank account is credited instead of Accounts Receivable.
Glencoe Accounting

26. Posting to the Accounts Receivable Subsidiary Ledger
Analyzing Sales Transactions
Section 14.2
Business Transaction
On December 4 The Starting Line issued Credit Memorandum 124 to Gabriel Ramos for the return of merchandise purchased on account, $150 plus $9 sales tax.
See page 393
Glencoe Accounting

27. Posting to the Accounts Receivable Subsidiary Ledger
Analyzing Sales Transactions
Section 14.2
See page 394
Glencoe Accounting

28. Posting to the Accounts Receivable Subsidiary Ledger
Analyzing Sales Transactions
Section 14.2
See page 394
Glencoe Accounting

29. Demonstration Problems 1, 2, 3 & 4
Glencoe Accounting

30. Glencoe Accounting

31. Glencoe Accounting

32. Glencoe Accounting

33. Glencoe Accounting

34. Charge Customer Payments
Cash Transactions
Analyzing Cash Receipt Transactions
Section 14.3
Four Kinds of Cash Receipts
Sales are recorded on two tapes
The register tape lists the total cash sales and tax collected
Cash Sales
cash receipt
The cash received by a business in a single transaction.
Charge Customer Payments
Businesses record cash received on account from charge customers on pre-numbered receipts
cash sale
A transaction in which the business received full payment for the merchandise sold at the time of the sale.
Can be processed manually or electronically
Debit and credit card sales are recorded like cash sales
Bankcard Sales
Cash may be received from
Bank loans
Sale of assets other than merchandise
Other Cash Receipts
Glencoe Accounting

35. Cash Discounts The buyer receives merchandise at a reduced cost.
Analyzing Cash Receipt Transactions
Section 14.3
The buyer receives merchandise at a reduced cost.
A cash discount, or sales discount, is an advantage to both the buyer and the seller.
The seller receives cash quickly.
cash discount or sales discount
The amount a customer can deduct from the total owed for purchased merchandise if payment is made within a certain time; also called sales discount.
Glencoe Accounting

36. List the operating cycle for a merchandising business.
Question 1
List the operating cycle for a merchandising business.
Step 1: Purchase goods for resale
Step 2a: Sell goods for cash (skip to step 4).
Step 2b: Sell goods on account.
Step 3: Collect cash from accounts.
Step 4: Pay expenses.
Glencoe Accounting

37. Calculating Cash Discounts
When you see Terms like this:
2/10, n/30
The first number is the % of discount: 2%
The second number is how many days to pay in order to get the discount: 10 days
The n = means the entire amount is due.
The 30 = means it is due in 30 days if you do not take the discount.
Glencoe Accounting

38. Glencoe Accounting

39. Glencoe Accounting

40. End of