Accounting I & II

The Language of Business

Accounting I, Week of April 6, 2020

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CHAPTER 10,  Special Journals:  Sales and Cash Receipts  LESSON 10-1

Remember that a special journal is used for only 1 kind of transaction.  Today we will look at the Sales journal first.  Only SALES ON ACCOUNT will be journalized in the Sales Journal.  This is an easy journal with one exception:  the sales tax must be calculated and recorded in a new account–Sales Tax Payable.  Sales Tax Payable is a liability.  It is an amount that we the company owe to the state.  It must be separated from the amount the company sold the merchandise for.  When we sell merchandise to a charge customer, we must credit sales for the amount we are charging for the merchandise in the Sales account.  We, the company, must calculate the sales tax (Selling Price of Merchandise x Sales Tax Rate).  Credit sales Tax Payable; add the tax to the selling price and debit Accounts Receivable for the total.  Sometimes a state can choose some businesses to exempt from sales tax.  If the business is exempted from sales tax, the Sales Cr and the A/R DR will equal. (no sales tax to add) examples:  Schools and charitable organizations are exempt in most states.

Transaction with sales tax:  CR Sales for selling price of merchandise  ($454.50)  Calculate the Sales tax: ($454.50 x 6% state tax rate = $27.27) Cr Sales Tax Payable for $27.27.

Add the Sales CR to the Sales Tax Payable CR and DR A/Rec. for the total.  4454.40 + $27.27 = 481.77

Transaction without sales tax.  DR A/Rec for $454.50   and   CR Sales for the same amount  $454.40.  Leave Sales Tax Payable blank.

NOW COMPLETE:    Work Together 10-1 and On Your Own 10-1.  Sales tax rate is 6%.  Application Problem 10-1.

SKIP LESSON 10-2

LESSON 10-3 IS THE LAST SPECIAL JOURNAL:  Cash Receipts Journal.  ALL Cash receipts will be journalized in this special journal.  There are two kinds of cash receipts:  Cash received from cash sales AND cash received from a charge customer who is paying on account.

Cash and credit card sales are the same.  Debit cash for the total of sales plus the sales tax charged to cash customers and sales paid for with credit cards (VISA & Mastercard).  Be sure to look at examples in your electronic textbook.

Cash and credit card sales:  Credit Sales for the total of merchandise sold to cash customers; Credit Sales Tax Payable for the tax that was charged on those sales; debit Cash for the total of Cash and Sales Tax.    To journalize cash and credit card sales:    Put a checkmark (Use the V Key) in the account title column (no account name is necessary because all amounts are in special amount columns.)  The source document will be the Cash Register Tape from the computer terminal where the cash customers checked out.  See example.  T245

Receipt of a cash payment from a charge customer (A/Rec.):  Credit A/Rec. for the amount owed and paid by the customer for a charge sale.  Debit cash for the amount the company received.

Remember (in Chapter 9) how our creditors or vendors offered us, the company, a discount on the amount we owed if we paid early.   It was a Purchases Discount.  We, the company, will make the same kind of offer to our charge customers (Accts. Rec.).  This will be a Sales Discount.  It works the same way as the Purchases Discount but just from the seller’s point of view.

So here we go!  Received cash on account from Palmer Dentistry $1,450, less 2% discount for early payment.

CR A/Rec. for the original amount owed to our company, $1450 so the customer’s new balance is $0.  Debit Sales Discount for the 2% discount ($1450 x 2% = $29)  Debit Cash for the actual amount paid to our company ($1450 – 29 = $1421).  Look at the example of this transaction in your electronic textbook.

NOW COMPLETE:  Work Together 10-3 AND Own Your Own 10-3.  Application Problem  10-3.

Skip Lesson 10-4.

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Author: jholcomb

BBA degree, SHSU; MBE degree SFASU; 2 years working for the European Exchange System (Military computer operations) in Giessen, Germany; 47 years working for public school education; UIL Sponsor Excellence Award 2017.

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