1. Chapter 10
Objectives:
Define accounting terms related to sales and cash receipts for a merchandising business
Identify accounting concepts and practices related to sales and cash receipts for a merchandising business
Journalize sales on account using a sales journal
Journalize cash receipts using a cash receipts journal
Record sales returns and allowances using a general journal
LESSON 10-1

2. Lesson 10-1: Journalizing Sales on Account using a Sales Journal
5/27/2018
Terms Review:
Customer
Sales Tax
Sales Journal

3. SALES TAX
page 270
Customer—a person or business to whom merchandise or services are sold
Sales Tax—a tax on a sale of merchandise or services; sales tax is a percentage of sales paid by customers imposed by most states and some cities; the business is required to collect the sales tax but the amount collected must be submitted to the government agency for which is was collected
The amount collected is a liability to the business until paid to the government agency.
LESSON 10-1

4. SALES OF MERCHANDISE ON ACCOUNT
page 271
A sale of merchandise may be on account or for cash. A sale of merchandise increases the revenue of a business. Regardless of when payment is made, the revenue should be recorded at the time of a sale, not on the date cash is received. A sale for which cash will be received at a later date is known as a sale on account. A sale on account is also referred to as a charge sale.
LESSON 10-1

5. SALES JOURNAL
page 272
Sales journal—a special journal used to record only sales of merchandise on account
With these special amount columns, each sale on account transaction can be recorded on one line of the sales journal.
LESSON 10-1

6. SALES INVOICE
page 272
A form describing the goods or services sold, the quantity, and the price is known as an invoice.
Price of goods X Sales Tax Rate = Sales Tax
Price of Goods + Sales Tax = Total Amount
LESSON 10-1

7. SALE ON ACCOUNT
page 273
November 3. Sold merchandise on account to Village Crafts, $540.00, plus sales tax, $32.40; total, $ Sales Invoice No. 76. 1 2 3 4 5 6
1. Write the date.
2. Write the customer name.
3. Write the sales invoice number.
4. Write the total amount owed by the customer.
5. Write the sales amount.
6. Write the sales tax amount.
LESSON 10-1

8. TOTALING, PROVING, AND RULING A SALES JOURNAL
page 274
A sales journal is totaled, proved, and ruled at the end of the month.
LESSON 10-1

9. Lesson 10-1
Work Together 10-1 and On Your Own 10-1 on textbook page 275.
LESSON 10-1

10. LESSON 10-2: Journalizing Cash Receipts Using a Cash Receipts Journal
Terms Review:
Cash Sale
Credit Card Sale
Point-of-Sale (POS) terminal
Terminal summary
Batch report
Batching out
Cash Receipts Journal
Sales Discount

11. PROCESSING SALES TRANSACTIONS
LESSON 10-2
5/27/2018
PROCESSING SALES TRANSACTIONS
pages
Cash Sale—a sale in which cash is received for the total amount of the sale at the time of the transaction
Credit Card Sale—a sale in which a credit card is used for the total amount of the sale at the time of the transaction
Point-of-Sale (POS) terminal—a computer used to collect, store, and report all of the information of a sales transaction
Terminal Summary—the report that summarizes the cash and credit card sales of a point-of-sale terminal
(continued on next slide)
LESSON 10-2

12. PROCESSING SALES TRANSACTIONS
LESSON 10-2
5/27/2018
PROCESSING SALES TRANSACTIONS
pages
UPC (Universal Product Code)
Cash Register Receipt
Point-of-Sale (POS) Terminal Receipt
(continued on next slide)
LESSON 10-2

13. PROCESSING SALES TRANSACTIONS
page 277
Terminal Summary
Batch Report
(continued from previous slide)
LESSON 10-2

14. Processing Credit Cards
page 277
Batch report—a report of credit card sales produced by a point-of-sale terminal
Batching out—the process of preparing a batch report of credit card sales from a point-of-sale terminal
Every business has a contract with a bank to process its credit card sales.
Most banks deposit credit card sales in their business customer bank accounts in 2-3 days. However, some businesses may receive their cash the next business day.
Merchandising businesses pay a percentage of credit card sales as a fee for credit card processing.
LESSON 10-2

15. CASH RECEIPTS JOURNAL
page 278
Cash Receipts Journal—a special journal used to record only cash receipt transactions; you will always have something in the cash debit column of the cash receipts journal
Sales Discount—a cash discount on sales taken by a customer; a sales discount reduces the amount the customer must pay on account; cash discounts are available only to customers who purchase merchandise on account
LESSON 10-2

16. 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 34. 2 4 1 3 5 6 7
1. 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.
LESSON 10-2

17. CASH RECEIPTS ON ACCOUNT
page 280
November 6. Received cash on account from Country Crafters, $2,162.40, covering S69. Receipt No. 90. 1 2 3 4 5
1. Write the date.
2. Write the customer’s name.
3. Write the receipt number.
4. Write the credit amount.
5. Write the debit amount.
LESSON 10-2

18. Calculating Cash Receipts on Account with Sales Discount
page 282
Why would a merchandising business offer its customers a sales discount? To encourage early cash receipts
Sales Invoice Amount X Sales Discount Rate = Sales Discount
The sales discount reduces the amount received from the customer
What does the terms of sale 1/10, n/30 mean? You have 30 days to make the payment, but if you make the payment in 10 days you get a 1% discount.
LESSON 10-2

19. 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. 91. 1 2 3 4 5 6
1. Write the date.
4. Write the original invoice amount.
2. Write the customer’s name.
5. Write the amount of sales discount.
3. Write the receipt number.
6. Write the debit to cash.
LESSON 10-2

20. TOTALING, PROVING, AND RULING A CASH RECEIPTS JOURNAL
page 283
A cash receipts journal is totaled, proved, and ruled each time the end of a page is reached and always at the end of the month.
LESSON 10-2

21. Proving Cash at the End of a Month
page 283
Cash is proved using amounts from the cash receipts and cash payments journals and the balance shown in the checkbook on the next unused stub.
Cash on hand at the beginning of the month (balance of general ledger cash account)
Plus total cash received during the month (cash debit column total from cash receipts journal)
Equals total
Less total cash paid during the month (cash credit column total from cash payments journal)
Equals cash balance on hand at the end of the month
Equals Checkbook balance on the next unused check stub
LESSON 10-2

22. Work Together 10-2 and On Your Own 10-2 on textbook page 284
Lesson 10-2
page 284
Work Together 10-2 and On Your Own 10-2 on textbook page 284
LESSON 10-2

23. LESSON 10-3: Recording Transactions Using a General Journal
5/27/2018
LESSON 10-3: Recording Transactions Using a General Journal
Terms Review
sales return
sales allowance
credit memorandum

24. CREDIT MEMORANDUM FOR SALES RETURNS AND ALLOWANCES
page 285
Sales Return—credit allowed a customer for the sales price of returned merchandise, resulting in a decrease in the vendor’s accounts receivable
Sales Allowance—credit allowed a customer for part of the sales price of merchandise that is not returned, resulting in a decrease in the vendor’s accounts receivable
Credit Memorandum—a form prepared by the vendor showing the amount deducted for returns and allowances
LESSON 10-3

25. CREDIT MEMORANDUM FOR SALES RETURNS AND ALLOWANCES
page 285
Why does a merchandising business might credit a customer’s account yet allow them to keep the merchandise? The merchandising business must pay for the transportation cost of returning the items. Unless the items returned have value, there is no benefit to offset the transportation costs.
LESSON 10-3

26. JOURNALIZING SALES RETURNS AND ALLOWANCES
page 286
March 11. Granted credit to Village Crafts for merchandise returned, $58.50, plus sales tax, $3.51, from S160; total, $ Credit Memorandum No. 41. 2 4 1 3 5 6 9 8 7
1. Write the date.
6. Write the sales tax amount.
2. Write Sales Returns and Allowances.
7. Write the accounts to be credited.
3. Write CM and the credit memorandum number.
8. Draw a diagonal line in the Post. Ref. column.
4. Write the amount of the sales return.
9. Write the total accounts receivable amount.
5. Write Sales Tax Payable.
LESSON 10-3

27. Work Together 10-3 and On Your Own 10-3 on textbook page 287
Lesson 10-3
page 287
Work Together 10-3 and On Your Own 10-3 on textbook page 287
LESSON 10-3

28. Chapter 10 Problems
Application Problem 10-1
Application Problem 10-2
Application Problem 10-3
Mastery Problem 10-4
Challenge Problem 10-5
Ch10 Understanding Source Docs