mcgraw-hill ryerson

1McGraw-Hill Ryerson

College Accounting

First Canadian Edition

Price • Haddock • Brock • Hahn • Reed

ACCOUNTING FOR SALES,

ACCOUNTS RECEIVABLE,AND

CASH RECEIPTS

CHAPTER 8

2

TYPES OF BUSINESSES

3

1. Service Business - Sells service

2. Merchandise Business - Sells goods that it purchases

for resale3. Manufacturing Business - Sells goods that it produces

OBJECTIVE 1Record credit salesin a sales journal.

4

FASHION WORLD 5001 S. Portland UnitHamilton, ON Qty. Description Price Amount 1 Sports Jacket 100 00

DATE SALESPERSON AUTH. 1/2/-- T. Wells Goods Taken x To Be Delivered

GST 7 00 Sales Tax 6 00

Total 115 00 Special Instructions:

I authorize this purchase to be charged to my account.

Allen Avery Signature NAME Allen Avery

ADDRESS 612 Henderson Circle SALES INVOICE 3601 Windsor, ON

Send To

5

A SALES JOURNAL Page 1

COST OF GOODS SALES ACCOUNTS GST PST SOLD DEBIT INV. POST. RECEIVABLE PAY. PAY. SALES MERCHANDISE DATE NO CUSTOMER. REF. DEBIT CREDIT CREDIT CREDIT INV. CREDIT20X3Jan. 2 3601 Allen Avery 115.00 7.00 8.00 100.00 60.00 6

GENERAL JOURNAL Page 2

POST. DATE DESCRIPTION REF. DEBIT CREDIT 20X3 Jan. 2 Accounts Receivable 1011 115.00

GST Payable 1024 7.00 PST Payable 2031 8.00

Sales 4001 100.00 Sold merchandise on credit to Allen Avery Sales Invoice #3601

Recording Sales in a General Journal

Recording Sales in a Sales Journal

OBJECTIVE 2Post from the sales

journal to the general ledger accounts.

7

SALES JOURNAL Page 1

COST OF GOODS SALES ACCOUNTS GST PST SOLD DEBIT INV. P RECEIVABLE PAY. PAY. SALES MERCHANDISE DATE NO CUSTOMER. R DEBIT CREDIT CREDIT CREDIT INV. CREDIT20X3Jan. 2 3601 Allen Avery 115.00 7.00 8.00 100.00 60.00Jan. 7 3602 Helen Ballard 287.50 17.50 20.00 250.00 150.00Jan. 10 3603 Anthony Blackmon 345.00 21.00 24.00 300.00 180.00 Jan. 14 2604 John Sauve 230.00 14.00 16.00 200.00 120.00Jan. 17 3605 Kim English 460.00 28.00 32.00 400.00 240.00Jan. 20 3606 Nan Yang 172.50 10.50 12.00 150.00 90.00Jan. 27 3607 Paul Romero 57.50 3.50 4.00 50.00 30.00Jan. 28 3608 Laura Wilson 575.00 35.00 40.00 500.00 300.00Jan. 31 3609 Richard L’Hirondelle 402.50 24.50 28.00 350.00 210.00Jan. 31 3610 Allen Avery 517.50 31.50 36.00 450.00 270.00Jan. 31 Totals 3,162.50 192.50 220.00 2,750.00 1,650.00

8

ACCOUNT Accounts Receivable ACCOUNT NO. 1011 DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT20X3 Jan. 1 Balance 1,590.00 31 S1 3,162.50 4,752.50

1

2

34

5(1011)

8



8

ACCOUNT GST Payable ACCOUNT NO. 1024 DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT20X3 Jan. 31 Balance S1 192.50 192.50

1

2

3

4

5(1024)

9



8

ACCOUNT PST Payable ACCOUNT NO. 2031 DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT20X3 Jan. 31 Balance S1 220.00 220.00

1

2

3

4

5(2031)

10



8

ACCOUNT Cost of Goods Sold ACCOUNT NO. 5001 DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT20X3 Jan. 31 Balance S1 1,650.00 1,650.00 1,650.00

1

2

3

4

5(5001)

11



8

ACCOUNT Merchandise Inventory ACCOUNT NO. 1021 DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT20X3 Jan. 31 P1 8,610.00 8,610.00

S1 1,650.00 6,960.00

1

2

34

(1021)

12

• Saves time, effort, and recording space.

• Both journalizing and posting become more efficient.

• A sales journal requires only six summary postings to the general ledger at the end of each month no matter how many credit sales were entered.

• Allows division of work.

• Improves the audit trail by bringing together all entries for credit sales in one place and lists them by source document number as well as by date.

13

OBJECTIVE 3Post from the sales journal

to the customers’ accounts inthe accounts receivable

subsidiary ledger.

14

Name Allen Avery Terms

Address 612 Henderson Circle, Windsor, ON

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF.

20X3 Jan. 1 Balance 212.00

Jan. 2 Sales Invoice 3601 S1 115.00 327..00

1 2 34

6

15


COST OF GOODS SALES ACCOUNTS GST PST SOLD DEBIT INV. POST. RECEIVABLE PAY. PAY. SALES MERCHANDISE DATE NO CUSTOMER. REF. DEBIT CREDIT CREDIT CREDIT INV. CREDIT20X3Jan. 2 3601 Allen Avery 115.00 7.00 8.00 100.00 60.00 5

OBJECTIVE 4Record sales returns and

allowances in thegeneral journal.

16

FASHION WORLD

Credit MemorandumNan Yang111 Mockingbird LaneLondon, ON

Memo # 192 Sales Invoice # 3606 January 24, 20X3 Return defective mdse.

150.00

10.50

12.00

GST PST Total 162.50 17

Sales Returns and Allowances is a contra revenue account. Its debit balance directly reduces the credit balance of the revenue account. This account allows us to track returns of merchandise and allowances given to customers.

18

SALES RETURNS AND ALLOWANCES JOURNAL Page 7

SalesReturns Cost of Goods

Credit Accounts GST PST And Sold Credit Memo Post. Receivable Pay. Pay. Allowances Merchandise Date No. Customer Ref. Credit Debit Debit Debit Inv. Debit20X3Jan. 22 191 Kim English 57.50 3.50 4.00 50.00 -Jan. 24 192 Nan Yang 172.50 10.50 12.00 150.00 90.00Jan. 31 Total 230.00 14.00 16.00 200.00 90.00

20


DATE DESCRIPTION POST. DEBIT CREDIT REF.

20X3 Jan. 22 Sales Returns and Allowances 4051 50.00


Accounts Rec./Kim English 1011/ 57.50 Gave an allowance for damaged merchandise, Credit Memo 191; original sale made on Sales Inv. 3605 of Jan. 17 24 Sales Returns and Allowances 4051 150.00 GST Payable 1024 10.50

PST Payable 2031 12.00 Accounts Rec./Nan Yang 111/ 172.50 Accepted a return of defective merchandise, Credit Memo 192; original sale made on Sales Inv. 3606 of Jan. 20

Merchandise Inventory 1021 90.00 Cost of goods sold 5001 90.00 Return merchandise to inventory Unsuitable, to be re-shelved

19

OBJECTIVE 5Post sales returns and allowances

from the general journal to thegeneral ledger and the accounts

receivable subsidiary ledger.

20


DATE DESCRIPTION POST. DEBIT CREDIT REF. 20X3Jan. 24 Sales Returns and Allowances 4051 150.00


Accounts Rec./Nan Yang 1011/ 12.00 172.50 Accepted return of merchandise,

Unsuitable, credit memo 192, Sale made on Sales Invoice

3606 of Jan. 20

Merchandise Inventory 1021 90.00 Cost of goods sold 5001 90.00 Return merchandise to inventory Unsuitable, to be re-shelved

18

Name Nan Yang Terms Address 1111 Mockingbird Lane, London, ON


20X3 Jan. 1 Balance 26.50 Jan. 10 Sales invoice 3606 S1 172.50 199.00 Jan. 24 CM 192 J8 172.50 26.50 21

1

2

OBJECTIVE 6Record cash receipts in a

cash receipts journal.

22

A term in accounting thatincludes cheques, money

orders, and bank depositsas well as currency and

coins

A special-purpose fund set up to handle payments

involving small amounts of money.

CASH

PETTYCASHFUND

23

A special journal used to record transactions

involving the receipt of cash.

CASH RECEIPTS JOURNAL

24

CASH RECEIPTS JOURNAL Page 1Other Accounts Credit

Cost ofSsles Goods Sold

Date Explanation Post. Accounts GST Tax Debit Ref. Receivable Payable Payable Ssles Post Inventory

Credit Credit Credit Credit Account Title Ref. Amount Cash Debit Credit20X3 Jan. 6 Allen Avery 212.00 212.00 7 Cash Sales 106.40 121.60 1,520.00 1,748.00 912.00 10 John Bell 132.50 132.50 11 Investment C. Wells, 5,000.00 5,000.00 Capital 12 Anthony 265.00 265.00 Blackmon 14 Cash Sales 137.55 157.20 1,965.00 Cash 4.50 2,225.25 1,179.00 Short/Over 15 Richard 53.00 53.00 L’Hirondelle 16 Cash Refund Supplies 25.00

Prepaid GST 1.75 26.75 21 Kim English 100.00 100.00 21 Cash Sales 147.70 168.80 2,236.60 Cash 1.20 2,427.70

Short/Over 28 Cash Sales 24.50 28.00 350.00 402.50 210.00 31 Paul Romero 57.50 57.50 31 Laura Wilson 130.00 130.00 31 Cash Sales 114.80 131.20 1,640.00 1,886.00 31 Collection of note Notes 200.00 Receivable David Shaw Interest 9.00 209.00 Income

25

GST Payable + Sales Tax Payable + Sales Credit = Cash Debit $106.40 + $121.60 + $1,520.00 = $1,748.00

A verification that the amount of currency and coins in a cash register agrees with the amount shown on the audit tape.

CASH REGISTER PROOF

26

OBJECTIVE 7

Account for cash shortor over.

27

If there is less cash than the audit tape shows, the cash is said to be short.

If there is more cash than the audit tape shows, the

cash is said to be over.

CASH

OVER

SHORT

OR

28




Credit Credit Credit Credit Account Title Ref. Amount Cash Debit Credit20X3 Jan. 6 Allen Avery 212.00 212.00 7 Cash Sales 106.40 121.60 1,520.00 1,748.00 912.00 10 John Bell 132.50 132.50 11 Investment C. Wells, 5,000.00 5,000.00 Capital 12 Anthony 265.00 265.00 Blackmon 14 Cash Sales 137.55 157.20 1,965.00 Cash 4.50 2,225.25 1,179.00 Short/Over 15 Richard 53.00 53.00 L’Hirondelle 16 Cash Refund Supplies 25.00

Prepaid GST 1.75 26.75 21 Kim English 100.00 100.00 21 Cash Sales 147.70 168.80 2,236.60 Cash 1.20 2,427.70

Short/Over 28 Cash Sales 24.50 28.00 350.00 402.50 210.00 31 Paul Romero 57.50 57.50 31 Laura Wilson 130.00 130.00 31 Cash Sales 114.80 131.20 1,640.00 1,886.00 31 Collection of note Notes 200.00 Receivable David Shaw Interest 9.00 209.00 Income

29Cash Over


DATE DESCRIPTION POST. DEBIT CREDIT REF. 20X2 July 31 Notes Receivable 109 200.00 Accounts Rec./David Shaw 111/ 200.00 Received a 6-month, 9% note from David Shaw to replace open account

$200.00 July 31, 20X2 Six months AFTER DATE 1 PROMISE TO PAY TO THE ORDER OF Fashion World Two hundred and no/100 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DOLLARS PAYABLE AT City National Bank VALUE RECEIVED with interest at 9%

NO. 28 DUE January 31, 20X3 David Shaw

30

OBJECTIVE 8Post from the cash receipts journal to subsidiary and

general ledgers.

31




Credit Credit Credit Credit Account Title Ref. Amount Cash Debit Credit20X3 Jan. 6 Allen Avery 212.00 212.00 7 Cash Sales 106.40 121.60 1,520.00 1,748.00 912.00 10 John Bell 132.50 132.50 11 Investment C. Wells, 3001 5,000.00 5,000.00 Capital 12 Anthony 265.00 265.00 Blackmon 14 Cash Sales 137.55 157.20 1,965.00 Cash 5020 4.50 2,225.25 1,179.00 Short/Over 15 Richard 53.00 53.00 L’Hirondelle 16 Cash Refund Supplies 1029 25.00

Prepaid GST 1023 1.75 26.75 21 Kim English 100.00 100.00 21 Cash Sales 147.70 168.80 2,236.60 Cash 1.20 2,427.70

Short/Over 5020 28 Cash Sales 24.50 28.00 350.00 402.50 210.00 31 Paul Romero 57.50 57.50 31 Laura Wilson 130.00 130.00 31 Cash Sales 114.80 131.20 1,640.00 1,886.00 31 Collection of note Notes 1009 200.00 Receivable David Shaw Interest 4091 9.00 209.00 Revenue 31 Totals 950.00 530.95 606.80 7,585.00 5,232.45 14,905.20 4,551.00 1011 1024 2031 4001 1001 5001/1021

32


Cost of Ssles Goods Sold


Credit Credit Credit Credit Account Title Ref. Amount Cash Debit Credit20X3 Jan. 6 Allen Avery 212.00 212.00

Revenue 31 Totals 950.00 530.95 606.80 7,585.00 5,232.45 14,905.20 4,551.00 (1011) (1024) (2031) (4001) (1001) (5001/1021)

33

ACCOUNT Cash ACCOUNT NO. 1001

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 1 Balance 5,600.00 Jan. 31 CR1 14,905.20 20,505.20





Revenue 31 Totals 950.00 530.95 606.80 7,585.00 5,232.45 14,905.20 4,551.00 (1011) (1024) (2031) (4001) (1001) (5001/1021)

34

ACCOUNT Accounts Receivable ACCOUNT NO. 1011

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 1 Balance 1,590.00 Jan. 31 S1 3,162.50 4,752.50 14 J8 172.50 4,580.00 22 J8 57.50 4,522.50 31 CR1 950.00 3,572.50





Revenue 31 Totals 950.00 530.95 606.80 7,585.00 5,232.45 14,905.20 4,551.00 (1011) (1024) (2031) (4001) (1001) (5001/1021)

28

ACCOUNT GST Payable ACCOUNT NO. 1024

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 31 Balance S1 192.50 192.50 Jan. 31 CR1 530.95 723.45

ACCOUNT PST Payable ACCOUNT NO. 2031

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 1 Balance 695.40 Jan. 31 S1 220.00 915.40 31 CR1 606.80 1,522.20

35





Revenue 31 Totals 950.00 530.95 606.80 7,585.00 5,232.45 14,905.20 4,551.00 (1011) (1024) (20310 (4001) (1001) (5001/1021)

28

ACCOUNT Sales ACCOUNT NO. 4001

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 31 Balance S1 2,750.00 2,750.00 Jan. 31 CR1 7,585.00 10,335.00

ACCOUNT Cost of Goods Sold ACCOUNT NO. 5001

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3Jan. 31 S1 1,650.00 1,650.00 31 CR1 4,551.00 6,201.00

36





Revenue 31 Totals 950.00 530.95 606.80 7,585.00 5,232.45 14,905.20 4,551.00 (1011) (1024) (2031) (4001) (1001) (5001/1021)

ACCOUNT Merchandise Inventory ACCOUNT NO. 1021

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 1 Balance Jan. 31 S1 1,650.00 1,650.00 31 CR1 4,551.00 6,201.00

37

OBJECTIVE 9Prepare a schedule ofaccounts receivable.

38

Name Allen Avery Terms

Address 612 Henderson Circle, Windsor, ON


20X3 Jan. 1 Balance 212.00 2 Sales invoice 3601 S1 115.00 327.00 6 CR1 212.00 115.00 31 Sales invoice 3610 S1 517.50 632.50

Name Helen Ballard Terms

Address 1069 Warren Street, Etobicoke, ON


20X3 Jan. 1 Sales invoice 3602 S1 287.50 287.50

39

Name John Bell Terms

Address 9 Glen Road, Mississauga, ON


20X3 Jan. 1 Balance 132.50 10 CR1 132.50 0

Name Anthony Blackmon Terms

Address 216 Lawson Street, Toronto, ON


20X3 Jan. 1 Balance 530.00 30 Sales invoice 3603 S1 345.00 875.00 12 CR1 265.00 610.00

40

Name Kim English Terms

Address 4900 Vista Ridge Road, Brampton, ON


20X3 Jan. 1 Balance 106.00 17 Sales invoice 3605 S1 460.00 566.00 21 CR1 100.00 466.00 22 CM191 J8 57.50 408.50

Name John Sauve Terms

Address 2147 Mission Drive, Toronto, ON


20X3 Jan. 1 Balance 318.00 14 Sales invoice 3604 S1 230.00 548.00

41

Name Richard L’Hirondelle Terms

Address 1026 Barr Street, Mississauga, ON


20X3 Jan. 1 Balance 53.00 15 CR1 53.00 0 31 Sales invoice 3609 S1 402.50 402.50

Name Paul Romero Terms

Address 148 Fallon Street, Windsor, ON



42

Name Laura Wilson Terms

Address 6480 Oak Tree Drive, Toronto, ON



Name Nan Yang Terms

Address 1111 Mockingbird Lane, London, ON


20X3 Jan. 1 Balance 26.50 10 Sales invoice 3606 S1 172.50 199.00 24 CM 192 J8 172.50 26.50

43

FASHION WORLD Schedule of Accounts Receivable

January 31, 20X3

Allen Avery 632.50Helen Ballard 287.50Anthony Blackmon 610.00Kim English 408.50John Hernandez 548.00Richard Narvaez 402.00Paul Romero 106.00Laura Wilson 551.00Nan Yang 26.50 Total 3,572.50

ACCOUNTS RECEIVABLE

SUBSIDIARY ACCOUNTS

33

ACCOUNT Accounts Receivable ACCOUNT NO. 1011

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 1 Balance 1,590.00 Jan. 31 S1 3,162.50 4,752.50 14 J8 172.50 4,580.00 22 J8 57.50 4,522.50 31 CR1 950.00 3,572.50

44

WHOLESALE BUSINESS

45

• Wholesalers are manufacturers or distributors of goods who sell to retailers or large consumers such as hotels and hospitals.

• Wholesalers handle sales and accounts receivable in the same manner as retailers.

• Many wholesalers offer cash discounts.

OBJECTIVE 10Compute trade discounts.

46

The amount the wholesaler records in its sales journal as the sales price of the goods.

The established retail price.Reductions from list price.

List PriceTrade DiscountInvoice Price

47

List Price - Trade Discount = Invoice Price

48

List Price $500Less 40% discount ($500 x .40) - 200Invoice Price $300

49

List Price $500.00Less first discount ($500 x .25) - 125.00Difference $375.00Less second discount ($375 x .15) - 56.25Invoice price $318.75

In most cases, Goods and Services Tax will apply; therefore, the sales journal will have three amount columns, Accounts Receivable debit, GST Payable credit and Sales credit. 50


Accounts GST

Invoice Post. Receivable Payable. Sales Date No. Customer’s Name Ref. Debit Credit Credit20X3Jan. 2 7711 Evers Hardware 856.00 56.00 800.00

Company

31 7820 Wilson Department 2,033.00 133.00 1,900.00 Store

31 Total 16,692.00 1,092.00 15,600.00 (1011) (1024) (4001)

ACCOUNT Accounts Receivable ACCOUNT NO. 1011 DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT20X3 Jan. 1 Balance 22,800.00 31 S1 16,692.00 34,492.00

SALES JOURNAL Page 1 Accounts GST Invoice Post. Receivable Payable. Sales Date No. Customer’s Name Ref. Debit Credit Credit20X3Jan. 2 7711 Evers Hardware 856.00 56.00 800.00

Company


31 Total 16,692.00 1,092.00 15,600.00 (1011) (1024) (4001)

45

ACCOUNT GST Payable ACCOUNT NO. 1024 DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT20X3 Jan. 31 Balance S1 1092.00 1092.00

51


Accounts GST

Invoice Post. Receivable Payable. Sales Date No. Customer’s Name Ref. Debit Credit Credit20X3Jan. 2 7711 Allen Avery 856.00 56.00 800.00


31 Total 16,692.00 1,092.00 15,600.00 (1011) (1024) (4001)

52

ACCOUNT Sales ACCOUNT NO. 4001

DATE EXPLANATION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20X3 Jan. 31 S1 15,600.00 15,600.00

mcgraw-hill ryerson

Documents

r debit credit credit

sales journalobjective

sales tax

sales merchandise date

sales journal page

debit credit balance

general journalrecording

accounts receivable