CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 10-2 Journalizing Cash Receipts Using a Cash Receipts Journal

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning PROCESSING SALES TRANSACTIONS A sale in which cash is received for the total amount of the sale at the time of the transactions is a cash sale A sale in which a bank-approved credit card is used for the total amount of the sale at the time of the transaction is called a credit card sale VISA, MasterCard, Discover 2 LESSON 10-2 pages

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning PROCESSING SALES TRANSACTIONS Traditional cash register to process sales transactions Enter the price marked on each item sold, push a button instructing the cash register to total the sale including any tax, and produce a cash register receipt At the end of the day, the cash register prints a summary of the sales recorded The summary is adequate for journalizing the sales transaction The summary does NOT provide information about what was sold, when it was sold and to which customers 3 LESSON 10-2 Cash Register Receipt pages

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning PROCESSING SALES TRANSACTIONS A computer used to collect, store, and report the information of a sales transaction is called a point-of-sales (POS) terminal (a modern version of a cash register) Before any sales are made, information about the number, description, price, and quantity on hand of each item of merchandise is entered into the POS terminal. When processing a sale using this method, a scanning device is used to scan the UPC (universal product code) symbol on the item When a sale is made, the POS terminal matches the number represented by the UPC symbol with the merchandise number to obtain the description and price of the merchandise 4 LESSON 10-2 pages UPC (Universal Product Code)

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning PROCESSING SALES TRANSACTIONS After all merchandise has been scanned, the method of payment is entered Cash Sale- enter the cash amount tendered and the POS terminal computes the amount of change Credit Card Sale- customer swipes card The POS system produces a receipt containing detailed information about the sale 5 LESSON 10-2 Point-of-Sale (POS) Terminal Receipt pages

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning PROCESSING SALES TRANSACTIONS Periodically, the POS terminal is instructed to print a report of all cash and credit card sales – Terminal Summary Can be used as the source document for recording sales in journals (Accounting Concept – Object Evidence) The POS terminal can produces a variety of reports to help management in decision making: Report of sales by clerk – analyze a clerk’s efficiency Report of sales by time of day – scheduling clerks to match busy periods Report of merchandise having a low quantity on hand – alerts management to order more 6 LESSON 10-2 pages Terminal Summary (continued from previous slide)

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning PROCESSING CREDIT CARDS Sales information for credit card sales is stored in the POS terminal. The POS terminal can print a report of credit card sales – known as a batch report Can be detailed, showing each credit card sale Can provide a summary of the number and total of sales by credit card type The process of preparing a batch report is called batching out See page 278 for details 7 LESSON 10-2 pages Batch Report

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH RECEIPTS JOURNAL A special journal for recording only cash receipts Since all cash receipt transactions affect the cash account, a special column is provided for this general ledger account Since many cash receipt transactions affect the accounts receivable account, the sales account, and the tax payable account, special columns are included for these general journal accounts as well To encourage early payment, customers are sometimes allowed to take a deduction from the invoice amount – called a Sales Discount This allows a customer to pay less than the amount previously recorded in the sales account Sales discounts reduce the amount the seller receives on sales on account These discounts are recorded in a special column titles Sales Discount Debit 8 LESSON 10-2 page 278

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH AND CREDIT CARD SALES Management is responsible for determining how often the business should batch out, deposit cash, and record sales in the sales journal The POS terminal assigns each summary a sequential number 9 LESSON 10-2 page 279

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 10-2 CASH AND CREDIT CARD SALES page 279 November 4. Recorded cash and credit card sales, $5,460.00, plus sales tax, $327.60; total, $5, Terminal Summary Write the date. 2.Place a check mark in the Account Title column. 3.Write the terminal summary document number. 4.Place a check mark in the Post. Ref. column. 5.Write the sales amount. 6.Write the sales tax amount. 7.Write the cash amount. 7

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH RECEIPTS ON ACCOUNT When cash is received on account from a customer, a receipt is prepared Prepared in duplicate One copy given to customer, one kept for use as source document A cash receipt on account transaction decreases future amounts to be collected from a customer Increase the cash account balance and decreases the accounts receivable account balance 11 LESSON 10-2 page 280

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 10-2 CASH RECEIPTS ON ACCOUNT page 280 November 6. Received cash on account from Country Crafters, $2,162.40, covering S69. Receipt No Write the date. 2.Write the customer’s name. 3.Write the receipt number. 4.Write the credit amount. 5.Write the debit amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CALCULATING CASH RECEIPTS ON ACCOUNT WITH A SALES DISCOUNT Sales Invoice Amount x Sales Discount Rate = Sales Discount 13 LESSON 10-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning JOURNALIZING CASH RECEIPTS ON ACCOUNT WITH SALES DISCOUNTS Sales discounts are recorded in a general ledger account titled Sales Discount Since sales discounts decrease sales, the account Sales Discount is a contra account to Sales 14 LESSON 10-2 page 282

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 15 LESSON 10-2 JOURNALIZING CASH RECEIPTS ON ACCOUNT WITH SALES DISCOUNTS page 282 November 7. Received cash on account from Cumberland Center, $1,176.00, covering Sales Invoice No. 74 for $1,200.00, less 2% discount, $ Receipt No Write the original invoice amount.1.Write the date. 2.Write the customer’s name. 3.Write the receipt number. 5.Write the amount of sales discount. 6.Write the debit to cash.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 16 LESSON 10-2 TOTALING, PROVING, AND RULING A CASH RECEIPTS JOURNAL page 283

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 17 LESSON 10-2 TERMS REVIEW cash sale credit card sale point-of-sale (POS) terminal terminal summary batch report batching out cash receipts journal sales discount page 284

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning WORK TOGETHER 10-2 page LESSON 10-2 Journalizing cash receipts; proving and ruling a cash receipts journal 1.Using the current year, journalize the following transactions beginning on line 1. Source documents are abbreviated as follows: receipt, R; terminal summary, TS. Transactions: Oct. 4. Received cash on account from Oakley Company, $371.00, covering S96, R Recorded cash and credit card sales, $8,361.60, plus sales tax, $501.70; total, $8, TS Received cash on account from Sierra Supply, covering S97 for %5,989.00, less 2% discount. R145 2.For the end of the month, total and prove cash receipts journal page Prove cash. The Oct. 1 cash account balance in the general ledger was $11, The Oct. 31 cash credit total in the cash payments journal is $8, On Oct. 31, the balance on the next unused check stub was $18, Rule page 16 of the cash receipts journal.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 19 LESSON 10-2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning ON YOUR OWN 10-2 page LESSON 10-2 Journalizing cash receipts; proving and ruling a cash receipts journal 1.Using the current year, journalize the following transactions beginning on line 1. Source documents are abbreviated as follows: receipt, R; terminal summary, TS. Transactions: Nov. 2. Received cash on account from Wakeman Auto, $425.00, covering S Recorded cash and credit card sales, $3,254.30, plus sales tax, $189.55; total, $3, TS Received cash on account from Cooley Used Cars, covering S295 for $1,459.00, less 2% discount. R313 2.For the end of the month, total and prove cash receipts journal page Prove cash. The Nov. 1 cash account balance in the general ledger was $2, The Nov. 30 cash credit total in the cash payments journal is $4, On Nov. 30, the balance on the next unused check stub was $3, Rule page 17 of the cash receipts journal.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Audit Your Understanding What is the difference in the receipt received by a customer from a cash register versus a point-of-sale terminal? 2.What are the two types of batch reports? 3.Who transfers funds between banks involved in the credit card sales? 21 LESSON 10-2