1. Welcome Back 1Atef Abuelaish

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4. Homework assignment Using Connect – EXAM # 2 for 100 Points. 7Accounting for Sales, Accounts Receivable, and Cash Receipts Prepare for Chapter 7 “Accounting for Sales, Accounts Receivable, and Cash Receipts.” Happiness is having all homework up to date Atef Abuelaish4

5. Chapter 06 Accounting for Sales, Accounts Receivable, and Cash Receipts Understanding Merchandising Companies Section 1: Understanding Merchandising Companies

6. Meet Maxx-Out Sporting Goods Maxx-Out Sporting Goods is a merchandising business that sells the latest sporting goods and sportswear for men, women, and children. It is a retail business. Max Ferraro is the sole proprietor of the firm. 7-6

7. Accounts of a Merchandising Companies 7-7 > PDF page 191

8. The journal entry to record a sale of $500 for cash on January 2 1) Recording Sales for Cash and On Account. 7-8

9. Recording Sales for Cash and On Account 7-9 On January 3, Maxx-Out Sporting Goods sold merchandise on credit to Roy Anderson, issuing Sales Slip 1101 for $400. The journal entry to record the sale

10. Recording Sales for Cash and On Account 7-10 The journal entry records Roy Anderson’s payment of the amount due on January 31.

11. Recording Sales with Sales Tax Payable for Cash and On Account 7-11 The journal entry to record a sale of $500 plus tax for cash follows.

12. Recording Sales with Sales Tax Payable for Cash and On Account 7-12 The journal entry to record the sale of merchandise on credit.

13. Sales Slip 7-13

14. If something is wrong with the goods sold, the firm may take a sales return, or give a sales allowance. Recording Sales Returns and Sales Allowances A cash refund is given in the case of a cash sale A credit memorandum is given in the case of a credit sale 7-14

15. Sales Returns and Allowances Returns and Allowances The Sales Returns and Allowances account is debited to record returns and allowances. 7-15

16. The journal entry to record a cash refund: Cash Refund 7-16

17. Credit Memorandum 7-17

18. Sales Returns and Allowances 200 Accounts Receivable Sales Tax Payable 216 16 Sales Allowance 7-18

19. Sales on credit will lead to increases in profit only if each customer completes the transaction by paying for the goods or services purchased. If payment is not received, the expected profits become actual losses and the purpose for granting the credit is defeated. Therefore businesses need to closely analyze a customer’s ability to pay before granting credit. 7-19 Disadvantages of Credit Sales Advantages of Credit Sales The volume of both sales and profits will increase, if buyers are given a period of a month or more to pay for the goods or services they purchase.

20. Credit Policies 7-20 Tight credit policies results in a low level of losses. Lenient credit policies may result in increased sales volume with a high level of losses. Each business must develop well-balanced credit policies:

21. Open-account credit Business credit cards Bank credit cards Cards issued by credit card companies Types of Credit Sales 7-21

22. Open-account credit sales and business credit card sales are accounted for as sales on credit. Open-account credit 7-22

23. Accounting for Credit Card Sales 7-23 Sales made to customers using bank credit cards, such as MasterCard and VISA are treated as cash sales. The processing fees charged by the credit card company are debited to the Credit Card Expense account.

24. Maxx-Out Sporting Goods sells merchandise on January 15 totaling $900 to customers using bank credit cards, plus 8 percent sales tax. The bank credit card company charges a 3 percent discount fee. 7-24

25. Journal entry to record the sales made to customers using bank credit cards on January 15. Credit Card Transactions 7-25

26. Credit Card Companies 7-26 Sales to customers using nonbank credit cards such as American Express and Diners Club are accounted for as sales on account. Nonbank credit cards usually take a few days to pay the seller. The amount remitted to the seller is net of the discount fee.

27. Maxx-Out Sporting Goods sells merchandise on January 16 totaling $1,000 to customers paying with American Express, plus 8 percent sales tax. American Express charges a 7 percent discount fee. The discount withheld by American Express would be $75.60 ($1,080.00 X 7%). 7-27

28. Journal entry to record the sales on January 16 and the subsequent payment on January 23 by American Express American Express Charges and Payments 7-28

29. Chapter 06 Accounting for Sales, Accounts Receivable, and Cash Receipts Special Topics in Merchandising Section 2: Special Topics in Merchandising

30. The basic procedures used by wholesalers to handle sales and accounts receivable are the same as those used by retailers. However, many wholesalers offer Cash discounts Trade discounts 2) Computing Trade Discounts. 7-30

31. Modern Sportsman, a wholesaler, records the sale and subsequent payment received follow. 3) Compute and record cash discounts on sales. 7-31

32. A customer returning merchandise and paying within the discount period is only entitled to a cash discount on the balance owed after the return. Cash Discounts on Sales, with Sales Returns 7-32

33. Reporting Net Sales 7-33

34. The Accounts Receivable Ledger The accounts receivable ledger has three money columns. debit The BALANCE column is presumed to contain debit amounts. 7-34

35. 111 indicates that the amount was posted to the Accounts Receivable account in the general ledger. The check mark indicates that the amount was posted to the customer’s account 4) Posting from the General Journal. 7-35

36. The use of an accounts receivable ledger does not eliminate the need for the Accounts Receivable account in the general ledger. However, the Accounts Receivable account (in control the General Ledger) is now considered a control account account. 5) Prepare a schedule of accounts receivable. 7-36

37. At the end of each month, after all the postings have been made, the balances in the accounts receivable ledger must be proved against the balance of the Accounts Receivable general ledger account. TOTAL OF INDIVIDUAL CUSTOMER BALANCES Subsidiary A/R Ledger ACCOUNTS RECEIVABLE BALANCE General Ledger = 7-37

38. Prepare a schedule of accounts receivable 7-38

39. 7-39

40. At the end of each month, after all the accounts have been posted, Maxx-Out Sporting Goods prepares the sales tax return. Three accounts are involved: Sales Tax Payable Sales Sales Returns and Allowances 6) Record the payment of sales taxes. 7-40

41. Sales Tax Due 8% Sales Tax Rate Taxable Gross Sales for January $25,000.00 x 0.08 $ 2,000.00 Sales Tax Computation 7-41

42. Homework assignment Using Connect – LS 20 Points, Quiz 20 Points, and EX. 60 Points. 8Accounting for Purchases, Accounts Payable, and Cash Payments Prepare for Chapter 8 “Accounting for Purchases, Accounts Payable, and Cash Payments.” Happiness is having all homework up to date Atef Abuelaish42

43. Thank you, and see you, Wednesday at the same time