@ 2012, Cengage Learning Accounting for Merchandising Businesses LO 3a – Recording Sales Transactions

Chart of Accounts LO 3

On January 3, NetSolutions sold $1,800 of merchandise for cash. Cash Sales LO 3

Using the perpetual inventory system, the cost of merchandise sold and the decrease in merchandise inventory are also recorded. The cost of merchandise sold on January 3 is $1,200. LO 3 Cash Sales

Sales made to customers using credit cards are recorded as cash sales. Assume that NetSolutions paid credit card processing fees of $48 on January 31. Cash Sales LO 3

On January 12, NetSolutions sold merchandise on account for $510. The cost of merchandise sold was $280. Sales on Account LO 3

 The terms for when payments for merchandise are to be made are called credit terms. If payment is required on delivery, the terms are cash or net cash. Otherwise, the buyer is allowed an amount of time, known as the credit period, in which to pay. Sales Discounts LO 3

Credit Terms  To encourage the buyer to pay before the end of the credit period, the seller may offer a discount. Credit terms of 2/10, n/30 are summarized in the next slide (Exhibit 7). LO 3

On January 17, NetSolutions receives the amount due within ten days, so the buyer deducted $30 ($1,500 x 2%) from the invoice amount. Receipts on Account LO 3

Credit Memo LO 3  A credit memorandum, often called a credit memo, authorizes a credit to (decreases) the buyer’s account receivable. An example of a credit memo issued by NetSolutions is shown in Exhibit 8.

Credit Memo LO 3

On January 13, issued Credit Memo No. 32 to Krier Company for merchandise returned to NetSolutions. Selling price, $225; cost to NetSolutions, $140. Credit Memo LO 3