Chapter 10 Accounting Theory

A special journal used to record only cash receipts transactions Cash Receipts Journal A special journal used to record only cash receipts transactions Daily or weekly cash and credit card sales are recorded as a single cash transaction. Cash is debited for the total amount and sales and sales tax payable are credited

Sales When merchandise is sold, revenue is recorded at the time of the sale not when cash is received. Purchases of merchandise on account are put in the sales journal Cash purchases go in the cash payments journal Buying supplies goes into the general journal Sales returns and allowances Contra revenue account to sales Credit memorandum A form used to show the amount deducted for sales returns and allowances Sales discount A cash discount taken by a customer Sales allowance Credit allowed to a customer which decreases accounts receivable

Sales Tax & Sales Discounts Sales tax collected is recorded as a liability until paid to the state government Sales tax is calculated by multiplying the sales amount by the sales tax percentage. Even when a sales discount is offered, the customer is invoiced for the full amount of the sale and sales tax. The discount is taken when the payment is made within the discount period The discount amount is taken away from the amount cash paid with the total increases the accounts receivable account with a debit. Sales discount is a contra account to sales and has a debit balance.

Other concepts The ledger balance must equal the amount on the first unused check stub Point-of-sale terminal A computer used to collect, store, and report all of the information of a sales transaction. Terminal summary The report that summarizes all cash and credit card transactions of a point of sale terminal. Batch report A report of credit card sales produced by a point-of-sale terminals. Batching out The process of preparing a batch report of credit card sales

Accounting Concepts Realization of revenue Objective evidence Recording revenue from transactions at the time the goods or services are sold Objective evidence Using source documents such as a terminal summary as a source document for transactions such as cash and credit card sales Debit cash short and over 2/10 Net 30 2% discount if paid within 10 days, if not due within 30 days If merchandise is purchased for $2,000 on October 1, with the terms 2/10 net 30, the amount due to the vendor on October 9th is $1,960. $2,000 x .02 = $40 $2,000-40= $1,960