Accounting CH 14

Section 1
Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Accounts Used by a
Merchandising Business
Accounting for a
Section 14.1
A merchandising
business buys A merchandising
merchandise (goods) business sells goods
from a wholesaler or to its customers.
manufacturer.
merchandise
A merchandising Goods bought to resell to
business keeps an customers.
inventory.
inventory
The items of merchandise a
business has in stock.

The Operating Cycle of
Accounting for a
Section 14.1
Retailers
Most merchandising
businesses are both
Wholesalers
retailer wholesaler
A business that sells to the A business that sells to the
final user, the consumer. retailers.

Accounts Used by a
Accounting for a
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.

Accounts Used by a
Accounting for a
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.

Section 2

Sales on Account
Analyzing Sales
Section 14.2
Transactions
A sale on account is made

to a charge customer.
sale on account charge customer

The sale of merchandise that A customer to whom a
will be paid for at a later date. sale on account is made.

Sales on Account
Analyzing Sales
Section 14.2
Transactions
sales slip
A charge sale involves: A form that lists the details
of a sale.
sales slip sales tax

A tax levied by a city or
state on the retail sale of goods
and services.
sales tax
credit terms
Terms that state the time
credit terms allowed for payment for a
sale on account.

Sales on Account
Analyzing Sales
Section 14.2
Transactions
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.

Sales on Account
Analyzing Sales
Section 14.2
Transactions
The credit terms are listed

on the sales slip.
credit terms
Terms that state the time
allowed for payment for a sale
on account.
See page 388

The Accounts Receivable
Subsidiary Ledger
Analyzing Sales
Section 14.2
Transactions
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.

Subsidiary Ledger
Analyzing Sales
Section 14.2
Transactions
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.

Subsidiary Ledger
Analyzing Sales
Section 14.2
Transactions
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.

Recording Sales
on Account
Analyzing Sales
Section 14.2
Transactions
Recorded at the time

of sale
Recording a sale
on account
Revenue must be
realizable

Recording Sales
on Account
Analyzing Sales
Section 14.2
Transactions
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

Recording Sales
on Account
Analyzing Sales
Section 14.2
Transactions
On December 3 The Starting Line sold merchandise on account to South

Branch High School Athletics for $1,500, Sales Slip 51.
See page 391

Recording Sales
on Account
Analyzing Sales
Section 14.2
Transactions
A merchant performs a A sales allowance may be

sales return for customers issued by the merchant if
who are unhappy with their merchandise is damaged
purchases. prior to purchase.
sales allowance
sales return
A price reduction granted
Any merchandise returned
for damaged goods kept
for credit or a cash refund.
by the customer.

Recording Sales
on Account
Analyzing Sales
Section 14.2
Transactions
Credit Memorandum
See page 392
credit memorandum
A form that lists the details of a sales return
or sales allowance.

Recording Sales
on Account
Analyzing Sales
Section 14.2
Transactions
The Sales Returns and Allowances account is a contra account.
contra account
An account whose balance is a
decrease to its related account.

Recording Sales
on Account
Analyzing Sales
Section 14.2
Transactions
Sometimes a cash refund is given and the Cash in Bank

account is credited instead of Accounts Receivable.

Posting to the Accounts
Receivable Subsidiary Ledger
Analyzing Sales
Section 14.2
Transactions
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

Analyzing Sales
Section 14.2
Transactions
See page 394

Analyzing Sales
Section 14.2
Transactions
See page 394

Section 3
Glencoe
Accounting Accounting Copyright © by McGraw-Hill Education. All rights reserved.
Cash Transactions
Analyzing Cash
Section 14.3
Receipt Transactions Four Kinds of Cash Receipts
• Sales are recorded on two tapes

Cash Sales • The register tape lists the total cash sales
and tax collected
cash receipt
The cash received by a
Charge • Businesses record cash received on business in a single
Customer account from charge customers on pre- transaction.
Payments numbered receipts
• Can be processed manually or cash sale

Bankcard electronically
• Debit and credit card sales are recorded like
A transaction in which the
Sales
cash sales business received full
payment for the
merchandise sold at the
• Cash may be received from
Other Cash – Bank loans time of the sale.
Receipts – Sale of assets other than
merchandise

Cash Discounts
Analyzing Cash
Section 14.3
Receipt Transactions
The buyer receives

A cash discount, merchandise at a
or sales reduced cost.
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.

Recording Cash Receipts
Analyzing Cash
Section 14.3
Charge Customer Payments
Recording Cash Discount Payments

Cash from Four
Sources
Cash Sales
Bankcard Sales

Analyzing Cash
Section 14.3
Charge Customer Payments

Line received $212 from Casey
Klein to apply to her account,
Receipt 301.
See page 399

Analyzing Cash
Section 14.3
Cash Discount Payments

Line received $1,470 from
South Branch High School
Athletics in payment of Sales
Slip 51 for $1,500 less the
discount of $30, Receipt 302.
See page 400

Analyzing Cash
Section 14.3
Cash Sales

Line had cash sales of $3,000
and collected $180 in sales
taxes, Tape 55.
See page 401

Analyzing Cash
Section 14.3
Bankcard Sales
The Starting Line had

bankcard sales of $700
and collected $42 in
related sales taxes on
December 15, Tape 55.
See page 402

Analyzing Cash
Section 14.3
Other Cash Receipts
On December 16, The Starting Line received $30 from Mandy Harris, an
office employee. She purchased a calculator that the business was no
longer using, Receipt 303.
See page 403

Question 1
A customer bought merchandise on February 1 totaling $1,800.00. As an

incentive to get this customer to pay early, you offer terms of 1/20, n/30.
The customer pays on February 15. Calculate the following:
Total sale amount $1,800.00
__________
$18.00
Amount of discount __________
Net cash received $1,782.00
__________
Now indicate whether you would debit or credit the following accounts.
Accounts Receivable Credit
__________
Customer’s subsidiary account __________
Credit
Sales Discounts Debit
__________
Cash in Bank Debit
__________

Accounting CH 14

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Accounting CH 14

Uploaded by

Copyright:

Available Formats

Section 1

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Inventory is represented in the general ledger by the

The normal balance of this account is a debit.

The purchase and sale of merchandise is recorded

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

The amount of the merchandise sold is recorded in

Increases to sales are recorded as credits.

Sales on account affect the Accounts Receivable

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

A sale on account is made

sale on account charge customer

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

sales slip sales tax

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

The credit terms are listed

See page 388

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

What is the accounts receivable

accounts receivable subsidiary ledger

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

See page 389

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Subsidiary Ledger Account Form

See page 389

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Recorded at the time

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

On December 1 The Starting

See page 390

On December 3 The Starting Line sold merchandise on account to South

See page 391

A merchant performs a A sales allowance may be

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

See page 392

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

The Sales Returns and Allowances account is a contra account.

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Sometimes a cash refund is given and the Cash in Bank

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

See page 393

See page 394

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

See page 394

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

• Sales are recorded on two tapes

• Can be processed manually or cash sale

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

The buyer receives

cash discount or sales discount

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

Charge Customer Payments

Recording Cash Discount Payments

Accounting Copyright © by McGraw-Hill Education. All rights reserved.

On December 5 The Starting

See page 399

On December 12 The Starting

See page 400

On December 15 The Starting