Chapter 14 – Part II

Analyzing Sales Transactions Store Credit Card Sales  Charge customers use credit cards issued by businesses such as Target to make purchases on account. Nonbank Credit Card Sales  Issued by corporations such as American Express or MasterCard to make purchases on account.

Items Related to Sales on Account Sales Slip – form that lists date of sale, customer account identification, and description, quantity, and price of the items sold.  Also know as the Invoice.  Multiple copies – At least one to serve as the source document for the corporation  Pre-numbered invoices aid accounting record accuracy.

Sales Tax Most states and some cities tax the retail sale of goods and services with a sales tax. Sales tax is paid by the customer and collected by the business. Business is the collection agency for the state or city government. Business keeps track of the amount owed in a liability account called Sales Tax Payable. (Increase with a Credit; Decrease with a Debit)

Credit Terms Located on the Sales Slip or Invoice. Credit terms state the time allowed for payment. Ex. n/30

Accounts Receivable Subsidiary Ledger Businesses with few each customers usually include the Accounts Receivable for each customer in the General Ledger A large business uses a separate ledger called an Accounts Receivable Subsidiary Ledger to keep track of customer accounts A subsidiary ledger is a ledger or book that contains detailed data summarized to a controlling account in the general ledger. The controlling account balance equals the balance of the subsidiary ledger. Write the example (Figure 14-3) at top of page 386 The Accounts Receivable subsidiary ledger has only three columns because the normal balance is assumed to be a debit balance.

Recording Sales on Account According to the revenue recognition principle, revenue for a sale on account is recognized and recorded at the time of sale, when it is earned. Revenue must also be realizable, which means it is expected to be converted to cash. Open book to page 387. Study the Business Transaction example Write the Business Transaction, Number 6 – T Accounts, Number 7-Journal Entry Answer the following questions

Analyze the Business Transaction Model – Answer Questions Refer to the Source Document – Sales Slip 50. How many pairs of shoes were sold? What kind of sale was made? When is the amount due? What does the slash mean in the General Journal Entry? (Refer to bottom of page 385) (See me to check answers to questions.)

Sales on Account to Tax Exempt Entities Certain government entities such as schools are exempt from Sales Tax. Record the example on the top of page 388.

Stop: Complete Demo Problem 14-2 Check you answers and continue with Power Point.

Bell-ringer for Tuesday Open books to page 388 and study the transaction at the top of the page. Explain the sales terms. What would be the total sale amount of 30 baseball uniforms had been purchased? Why is no sales tax recorded on the sales slip? What does the diagonal line in the Posting Reference column indicate?

Sales Returns and Allowances Sales Return – Merchandise returned for credit or a cash refund. Sales Allowance – A price reduction granted for damaged goods kept by the customer. Credit Memorandum – Issued for a sales return on a charge sale. Serves as the Source Document for the company. (Look at Figure 14-4 on page 389 and answer the questions on the following slide.)

Stop – Complete Demo Problems 14-3 and 14-4 Use notes and pages 388 and 389 as reference Check you answers and continue with Power Point.

Sales Return and Allowance Account Sales Returns and Allowances - Decrease the revenues earned by the business. Not recorded in the Sales Account. Recorded in a Contra Account – its balance decreases the balance of its related account. Record the example in the middle of page 389. Study the example on page 390. Write the Business Transaction, Number 6 – T Accounts, and Number 7 – Journal Entry. Answer the following questions

Questions –Business Transaction P. 390 What is the source document for recording the entry in this transaction? After the entry is recorded, what is done with the source document? Why is the Contra Revenue Account debited? (See me to check answers to the questions)

Posting to the Accounts Receivable Subsidiary Ledger Read Posting to the Accounts Receivable Subsidiary Ledger – Bottom of 389-top of 391 and study the example.(Figure 14-5) Answer the questions on the following slide.

Figure 14-4 What does the number 115 in the Post Ref. column of the General Journal mean? What does the check mark in the Posting Reference Column mean? If the $159 credit to Accounts Receivable/Gabriel Ramos had been posted as a debit, what effect would it have had on the accounts? See me to check answers to questions.

Independent Practice Demo Problem 14-3 – Check Answers Demo Problem 14-4 – Check Answers Page 392 – Do the Math and Problem 14-2 in Working Papers Check your answers