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.

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Demonstration Problems 1, 2, 3 & 4 Glencoe Accounting

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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

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

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

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

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