LESSON 2-1 Departmental Sales on Account and Sales Returns and Allowances
2 Departmental Sales on Account Sales on account are recorded by department in order to help management make decisions Sales on account are recorded in the Sales Journal Sales Tax Payable Credit column is used to record the amount of sales tax Zytech collects from customers (8.25%) Some organizations are tax exempt and have a special federal tax ID (schools) Sales invoice is the source document Prepared in duplicate original goes to customer and copy is the source document for recording the entry (CONCEPT: Objective Evidence) All departmental sales are recorded at the time of the sale, regardless of when cash is received (CONCEPT: Realization of Revenue) LESSON 2-1
3 JOURNALIZING SALES ON ACCOUNT page 37 June 1. Sold audio equipment on account to Kim Electronics, $280.00, plus sales tax, $23.10; total, $303.10. Sales Invoice No. 101. 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 invoice amount. 5. Write the sales tax payable amount. 6. Write the sales amount. LESSON 2-1
POSTING FROM A SALES JOURNAL TO THE ACCOUNTS RECEIVABLE LEDGER page 38 4 1 2 3 5 4 1. Write date. 2. Write sales journal page. 3. Enter amount in Debit column. 4. Enter account balance. 5. Write customer number in Post. Ref. column of sales journal. LESSON 2-1
POSTING FROM A SALES JOURNAL TO A GENERAL LEDGER ACCOUNT page 39 5 1 3 2 5 1. Write date. 2. Write sales journal page. 3. Enter debit amount. 4 4. Enter account balance. 5. Write general ledger account number in parentheses. LESSON 2-1
POSTING FROM A SALES JOURNAL TO A GENERAL LEDGER ACCOUNT 6 Individual amounts in the Accounts Receivable Debit column are posted often to the appropriate customer accounts in the Accounts Receivable Ledger Sales Journal is proved and ruled at the end of the month Post to General Ledger Make sure that total debits = total credits Double rule indicates that the equality of debits and credits has been proved General leger account number is recorded in ( ) under the column total to show that posting has been completed LESSON 2-1
JOURNALIZING SALES RETURNS AND ALLOWANCES 7 Contra Revenue Account account showing deductions from a sales account Sales Returns and Allowances Helps businesses see what proportion of the merchandise sold was returned by customers (CONCEPT: Adequate Disclosure) Credit Memorandum source document prepared by the vendor showing the amount deducted for returns and allowances Sales tax payable is also decreased when a return is accepted or allowance is granted Sales tax is calculated on the amount of the return If a business accepted a return on a cash sales, the transaction would be recorded in the cash payments journal LESSON 2-1
JOURNALIZING SALES RETURNS AND ALLOWANCES page 40 June 5. Granted credit to Kim Electronics for audio equipment returned, $130, plus sales tax, $10.73, from Sales Invoice No. 101; total, $140.73. Credit Memo No. 43. 8 1 2 3 5 6 4 7 1. Write date. 2. Enter accounts to be debited. 3. Record credit memo number. 4. Write debit amounts. 5. Enter accounts to be credited. 6. Draw diagonal line. 7. Write credit amount. LESSON 2-1
9 POSTING FROM GENERAL JOURNAL page 41 2 1. Date 1 5 3 4 2. Journal page number 3. Debit amounts 4. Credit amount 5. Account numbers 5 5 1 2 4 1 3 5 2 5 1 2 3 1 2 4 LESSON 2-1
10 TERM REVIEW page 43 When a sales return/allowance is granted AFTER the customer has paid for the purchase, the customer account may end up with a credit balance instead of a normal debit balance Contra balance reduces the amount to be received from a customer on future sales credit memorandum LESSON 2-1
LESSON 2-2 Journalizing and Posting Cash Receipts
12 Cash Receipts Journal Most cash receipts are from customers on account or for cash and credit card sales. Sales discount cash discount on sales Sales discount is often offered to encourage early payment. Discount amount is calculated on the total invoice amount not just on the sales amount. Receipt is prepared as the source document for cash received on account (CONCEPT: Objective Evidence). Sales is credited for the pre-tax amount sales tax is a liability owed to the government LESSON 2-2
JOURNALIZING A CASH RECEIPT WITH A SALES DISCOUNT page 45 June 1. Received cash on account from Olympic Productions, $1,803.44, covering Sales Invoice No. 96 for audio equipment for $1,840.25 ($1,700.00 plus sales tax, $140.25), less 2% discount, $36.81. Receipt No. 89. 13 1 2 3 4 5 6 1. Write the date. 2. Write the customer name. 3. Record the receipt number. 4. Write the accounts receivable credit amount. 5. Write the sales discount debit amount. 6. Write the cash debit amount. LESSON 2-2
14 DEPARTMENTAL CASH RECEIPTS page 44 Sales Amount + 8.25% Sales Tax = Total Invoice Amount $1,700.00 + $140.25 = $1,840.25 Terms: 2/10, n/30 Invoice paid within 10 days: Invoice Amount Discount Rate = Sales Discount $1,840.25 2% = $36.81 Total Invoice Amount 2% Sales Discount = Amount Due in 10 Days $1,840.25 $36.81 = $1,803.44 LESSON 2-2
15 Sales Returns and Allowances You must calculate the sales discount on the amount owed, not the original invoice Returns/allowances will reduce the sales discount Amt. of Sale + Tax = Total Rec. Original Sales Inv. Amt (S101) 280 + 23.10 = 303.10 -Sales Return (CM43) 130 + 10.73 = 140.73 =Sales Inv. Amt. after Return 150 + 12.37 = 162.37 Sales Invoice Amt. After Return x Sales Disc. Rate = Sales Disc. 162.37 x 2% 3.25 LESSON 2-2
JOURNALIZING A CASH RECEIPT WITH A SALES RETURN AND A SALES DISCOUNT page 46 June 8. Received cash on account from Kim Electronics, $159.12, covering Sales Invoice No. 101 for $303.10 ($280.00 plus sales tax, $23.10), less Credit Memorandum No. 43 for $140.73 ($130.00 plus sales tax, $10.73), less 2% discount, $3.25. Receipt No. 92. 16 1 2 3 4 5 6 1. Write date. 2. Write the customer name. 3. Record receipt number. 4. Write the account receivable credit amount. 5. Write the sales discount debit amount. 6. Write the cash debit amount. LESSON 2-2
17 Cash and Credit Card Sales Credit card sales are recorded together with cash sales because they are automatically deposited to the vendor s bank account POS (point-of-sale) Terminal computer used to collect, store, and report all the information of a sales transaction Terminal Summary report that summarizes the cash and credit card sale of a POS terminal This serves as the source document for cash and credit card sales (CONCEPT: Objective evidence) LESSON 2-2
JOURNALIZING CASH AND CREDIT CARD SALES page 47 June 11. Recorded cash and credit card sales, audio equipment, $4,370.00; video equipment, $6,280.00; plus sales tax, $878.63; total $11,528.63. Terminal Summary No. 53. 18 1 2 1. Date 2. Check mark in Account Title column 3. Cash register tape number 4. Check mark in Post. Ref. column 3 4 5 6 7 5. Sales tax payable credit amount 6. Sales credit amounts 7. Cash debit amount LESSON 2-2
POSTING FROM A CASH RECEIPTS JOURNAL page 48 19 1 2 1. Individual amounts are posted to the accounts receivable ledger. 2. Column totals are posted to the account named in the column heading. LESSON 2-2
20 ORDER OF POSTING FROM JOURNALS Businesses post transactions affecting vendor and customer accounts often during the month so that balances of subsidiary ledger accounts (A/P, A/R) are kept up to date. Posting to the general ledger may be done less frequently must be done at the end of the fiscal period to prepare financial statements Order of posting this generally places the debits/credits in the accounts in chronological order 1. Sales journal 2. Purchases journal 3. General journal 4. Cash receipts journal 5. Cash payments journal page 49 LESSON 2-2
21 TERMS REVIEW page 50 sales discount point-of-sale (POS) terminal terminal summary LESSON 2-2