Chapter 10 Vocab Test Review Try this technique… Improve recall and increase understanding: Take notes to summarize your learning and find connections. This approach is similar to the trick teachers often use of telling students they are welcome to bring one 3″ x 5″ card of notes to use during the final exam. Most students discover during the exam that they don’t need most (or all) of the information they managed to cram onto the card. Why? Because creating the card required them to reflect on the material, find connections within the material, decide what was most important, then write the essence of it all down to make it fit on one small card. The process of summarizing and finding connections, then writing them down, will help you to “understand” material. “Taking notes” may seem similar, but it all too often does not involve summarizing or finding connections. Summarizing and finding connections require reflection – you must think about the new material and how it relates (if at all)  to experiences you have had and/or other topics you already understand. The discovery of connections and/or relationships are what lead to both long term recall and understanding. . .

Subsidiary Ledgers and Controlling Accounts Lesson 10-1 Subsidiary Ledgers and Controlling Accounts The amount a business receives from the sale of an item of merchandise is called the selling price. The amount a business adds to the cost of merchandise to establish the selling price is called markup. An accounts receivable ledger is a subsidiary ledger containing all accounts for charge customers. (Please see the example on the next slide.)

Subsidiary Ledgers and Controlling Accounts Lesson 10-1 Subsidiary Ledgers and Controlling Accounts

Lesson 10-1 Sales Journal A sales journal is a special journal used to record only sales of merchandise on account. Realization of Revenue Concept: Regardless of when payment is received, the revenue is recorded when a sale is made. (Sales Credit)

Lesson 10-1 Sales Invoice Sales Tax: A tax on the sale of merchandise or services. Reported as a percent of sales. (Price of goods x sales tax rate.) Government, and Churches, and Schools, and Non-Profit organizations are exempt from paying sales tax.

Lesson 10-1 Sale on Account: When merchandise is sold and sales tax is also collected… Accounts Receivable 481.77 November 4. Sold merchandise on account to Wells Apartments, $454.50, plus sales tax, $27.27; total, $481.77. Sales Invoice No. 498. Sales 454.50 Sales Tax Payable 27.27 The Accts. Rec’ble balance increases by the amount of the sale plus the tax, Sales is credited, and Sales Tax Payable is credited. Sales Tax Payable is a liability account with a normal credit balance. The transaction is recorded in the Sales Journal on the day of the sale.

Posting from a Sales Journal to an Accounts Receivable Ledger Lesson 10-2 Posting from a Sales Journal to an Accounts Receivable Ledger

Totaling, Proving, and Ruling a Sales Journal Lesson 10-2 Totaling, Proving, and Ruling a Sales Journal Accounts Receivable = Sales plus Sales Tax Payable They owe you for the amount of the merchandise sold plus the tax.

Processing Cash Sales Transactions Lesson 10-3 A sale in which the customer pays for the total amount of the sale at the time of the transaction is called a cash sale. Credit card and debit card sales are treated as cash sales because the business receives its cash in a very short time. A specialized computer used to collect, store, and report all the information about a sales transaction is called a point-of-sale (POS) terminal. The report that summarizes the cash and credit card sales of a point-of-sale terminal is called a terminal summary. AKA: Z Tape for 376.00 and Debit Cash for 6,656.80

Processing Cash Sales Transactions Lesson 10-3 This Terminal Summary (TS) (source document/objective evidence) is used to record the cash and credit card sales for the day. Credit Sales for 6,280, Credit Sales Tax Payable for 376.00 and Debit Cash for 6,656.80

Processing Credit Cards Lesson 10-3 Processing Credit Cards Sales information for credit card sales is stored in the POS terminals. A report of credit card sales produced by a point-of-sale terminal is called a batch report. A batch report can be detailed, showing every credit card sale. Or, the batch report can be a summary, showing only the number and total of sales by credit card type.

Processing Credit Cards Lesson 10-3 Processing Credit Cards The process of preparing a batch report detailing credit card sales from a point-of-sale terminal is called batching out. Most companies receive the cash for debit and credit card sales from the bank within 2-3 business days after batching out.

Lesson 10-3 Special Journal A cash receipts journal is a special journal used to record only cash receipt transactions. A cash discount on a sale taken by the customer is called a sales discount. The discount is taken if they pay early (within 10 days). 2/10, n/30 means if the account is paid within 10 days, a 2% discount will be allowed. .

Cash and Credit Card Sales Lesson 10-3 Cash and Credit Card Sales Cash 6,656.80 November 4. Recorded cash and credit card sales, $6,280.00, plus sales tax, $376.80; total, $6,656.80. Terminal Summary 35. Sales 6,280.00 Sales Tax Payable 376.80

Cash Receipts on Account (no sales discount) Lesson 10-3 Cash Receipts on Account (no sales discount) Cash 2,516.80 November 4. Received cash on account from Edmonds Hospital, $2,516.80, covering S448. Receipt No. 610. Accounts Receivable 2,516.80

Calculating Cash Receipts on Account with Sales Discount Lesson 10-3 Calculating Cash Receipts on Account with Sales Discount Sales Invoice Amount Sales Discount Rate Sales Discount × = $1,450.00 2% $29.00 × = The customer will pay $29.00 less if they pay within the ten day discount period.

Journalizing Cash Receipts on Account with Sales Discounts Lesson 10-3 Journalizing Cash Receipts on Account with Sales Discounts Cash 1,421.80 November 5. Received cash on account from Palmer Dentistry, $1,421.00, covering Sales Invoice No. 462 for $1,450.00, less 2% discount, $29.00. Receipt No. 611. Accounts Receivable 1,450.00 Sales Discount 29.00 Sales Discount is a contra account against Sales. (It will reduce sales on an income statement, because it represents sales dollars you won’t collect.) Its normal balance side is the side opposite the Sales account’s normal balance side.

Totaling, Proving, and Ruling a Cash Receipts Journal Lesson 10-3 Totaling, Proving, and Ruling a Cash Receipts Journal Column Title Debit Totals Credit Totals General Debit ………………........ ― General Credit …………………….. Accounts Receivable Credit …. $11,641.30 Sales Credit ………………..... ...... 43,119.33 Sales Tax Payable Credit……... 2,381.46 Sales Discount Debit....…........ $ 72.25 Cash Debit……………….............. 57,069.84 Totals………………...................... $57,142.09

Proving Cash at the End of a Month Cash on hand at the beginning of the month ...................... $18,941.69 (Nov. 1 balance of general ledger cash account) Plus total cash received during the month ........................... 57,069.84 (Cash Debit column total, cash receipts journal) Equals total ............................................................................. $76,011.53 Less total cash paid during the month .................................. 23,546.38 (Cash Credit column total, cash payments journal) Equals cash balance on hand at the end of the month ......... $52,465.15 Checkbook balance on the next unused check stub ............. $52,465.15

The general debit and credit column totals are not posted. Lesson 10-3 Posting Special Amount Column Totals of a Cash Receipts Journal to a General Ledger The general debit and credit column totals are not posted. Special amount column totals are all posted individually.

Completed Accounts Receivable Ledger Lesson 10-3 Completed Accounts Receivable Ledger Posting must be done frequently to ensure that each customer account shows an up-to-date balance.

Proving the Accounts Receivable Ledger Lesson 10-3 Proving the Accounts Receivable Ledger A listing of customer accounts, account balances, and total amount due from all customers is called a schedule of accounts receivable. Report is correct if the total equals the balance of the Accounts Receivable Account in the General Ledger.

The End Remember, don’t lose time memorizing, work at understanding.