Ch 20 Lecture Guide

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ACCOUNTING-I

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Chapter 20
Lecture Guide
Accounting for a Corporation Recording Sales
Cash Receipts Using Special Journals
2
Contents 1
Whats New ? I. SALES JOURNAL A. Journalizin
g Sales on Account B. Posting to the Accounts
Receivable Ledger C. Posting to the General
Ledger II. CASH RECEIPTS JOURNAL A. Journalizi
ng Cash Credit Card Sales B. Sales Discounts
3
Contents 2
II. CASH RECEIPTS JOURNAL (cont) C. Calculatin
g Journalizing Cash Receipts on Account with
Sales Discounts D. Posting to the Accounts
Receivable Ledger E. Posting to the General
Ledger III. RECORDING TRANSACTIONSGENERAL
JOURNAL A. Sales Returns Allowances B. Journ
alizing Sales Returns Allowances C. Journalizi
ng Correcting Entries Affecting Customer
Accounts D. Posting from a General Journal
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Contents 3
IV. PREPARING A SCHEDULE OF ACCOUNTS V. ORDER
OF POSTING FROM SPECIAL JOURNALS VI. INTERNATION
AL SALES A. International Sales B. Processing
Accounting for International Sales C. Time
Drafts D. Trade Acceptances VII. SUMMARY
ILLUSTRATIONS
5
Whats New?

• More special journals
• Sales Journal all sales on account
• Cash Receipts Journal all cash receipts
• Sales Discounts
• Sales Returns Allowances
• Correcting Entries
• Order of Posting from Special Journals
• International Sales
• Time Drafts
• Trade Acceptances

Contents
6
I. SALES JOURNAL

• Used ONLY to record SALES MADE ON ACCOUNT
• Combines the A/R Dr, Sales Cr, and Sales Tax
  Payable Cr columns of an expanded Journal
• Account Debited A/R sub ledger account
  (customer name)
• Source document Sales invoice
• General ledger accounts affected
• Accounts Receivable --- Asset
• Sales ------------------------- Revenue
• Sales Tax Payable ------- Liability

20-1 (p 519)
Contents
7
I. SALES JOURNAL A
A. Journalizing Sales on Account 1. Date as
shown on the sales invoice 2. Account Debited
customer name 3. Sale No. S (sales invoice
number) 4. Special column amounts Invoice
total -- A/R Dr column Amount sold -- Sales Cr
column Sales tax -- Sales Tax Payable
20 -2 (p 520)
Contents
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I. SALES JOURNAL B
B. Posting to the Accounts Receivable
Ledger Post transactions DAILY to the account
named in the Account Debited column.
1. Date Sales Journal transaction
date 2. Sub-ledger Post. Ref. S (Sales
Journal page ) 3. Dr Amount A/R Debit column
amount 4. Balance calculate the new
balance 5. Sales Journal Post. Ref. Sub-ledger
account number
20 -3 (p 475)
Contents
9
I. SALES JOURNAL C
C. Posting to the General Ledger AT THE END OF
EACH MONTH, prove (double-tape) and rule the
Sales Journal. Review posting steps in Chapter
18. Post each Special Column total to the
account named in the column title.
1. Date last day of the month 2. Account
Post. Ref. S (Sales Journal page
number) 3. Amount column total 4. Balance
calculate new account balance 5. General Ledger
Post. Ref. General Ledger account number in
parentheses below corresponding column total
20 -4 (p 522)
Contents
10
Answer Audit Your Understanding p 523
1. What general ledger accounts are affected,
and how, by a sale on account? 2. How is each
amount in a Sales Journals Accounts Receivable
Debit column posted? 3. How often should Sales
Journal column totals be posted?
Contents
11
II. CASH RECEIPTS JOURNAL

• Used to record ALL CASH RECEIPTS
• Every entry includes a Cash Dr
• Combines the General Dr Cr, the A/R Cr, Sales
  Cr, Sales Tax Payable Cr, and Cash Dr columns of
  an expanded Journal
• Includes new columns for recording debits to
  Sales Tax Payable and the Sales Discounts account
  (contra account to Sales)
• Account Titles are entered for transactions
  related to all General Dr Cr and A/R Cr column
  entries
• Source document cash register tape (T)

20 -6 (p 524)
Contents
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II. CASH RECEIPTS JOURNAL A
A. Journalizing Cash Credit Card
Sales Remember Credit Card Sales are those for
which customers use credit cards issued by banks
and do not affect A/R /or sub-ledger accounts.
1. Date date of cash register tape 2. Account
Title ? 3. Doc. No. T (cash register tape
number) 4. Sales Cr total sales 5. Sales Tax
Payable (STP) Cr total tax 6. Cash Dr Sales
STP total
20 -7 (p 525)
Contents
13
II. CASH RECEIPTS JOURNAL B
B. Sales Discounts 1. Discounts are offered to
encourage early payment by customers of amounts
due. 2. Invoices are issued for total Sales
STP at the time merchandise is bought because
customers may not pay within the discount
period. 3. Discounts are awarded IF payments are
made within the stated time. 4. Discounts are
recorded as debits to the Sales Discounts account
(contra-account to Sales). 5. Discounts also
affect Sales Tax Payable but DO NOT change A/R
amounts due/paid.
(pp 525-6)
Contents
14
II. CASH RECEIPTS JOURNAL C-1
C. Calculating Journalizing Cash Receipts on
Account with Sales Discounts
1. Stated /, n/ (Ex 1/10,
n/30) / percent discount if paid in
days, n/ net amount (total) due in days
2. Accounts affected a. Sales Discounts (Dr
amount of discount) b. STP (Dr tax applied to
discounted amount) c. Cash (Dr actual amount
received)
Note Original A/R, Sales, and STP amounts are
not changed! Journal entries at the time of
payment show the impact of discounts.
(p 527)
II. C-2
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II. CASH RECEIPTS JOURNAL C-2
C. Calculating Journalizing Cash Receipts on
Account with Sales Discounts
3. Calculations a. Original Sales Cr X
discount discount b. Discount STP rate
(8) STP Dr
(p 481)
II. C-3
16
II. CASH RECEIPTS JOURNAL C-3
C. Calculating Journalizing Cash Receipts on
Account with Sales Discounts
4. Journal Entry
a. Date date of receipt b. Account Title
customer name c. Doc. No. R (receipt
number) d. Special column entries A/R Cr
(invoice total) STP Dr (STP rate discount
amount) Sales Discounts Dr (discount
amount) Cash Dr (A/R less STP Dr discount
Dr)
Proof A/R Cr total 3 Dr
20 -8 (p 528)
Contents
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II. CASH RECEIPTS JOURNAL D
D. Posting to the Accounts Receivable
Ledger Daily, post each transaction to the A/R
sub ledger for each customer named in the Account
Title column.
1. Date shown in the Cash Receipts
Journal 2. Sub-ledger Post. Ref. CR (Cash
Receipts Journal page number) 3. Credit amount
A/R Credit column entry 4. Balance calculate
new account balance 5. A/R Journal Post. Ref.
Sub-ledger account number
20 -9 (p 528)
Contents
18
II. CASH RECEIPTS JOURNAL E-1
E. Posting to the General Ledger At the end of
each month, prove (double-tape) and rule the Cash
Receipts Journal.
1. Posting from the General Columns General
Dr Cr entries will be presented in Chapter 24.
II. E-2
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II. CASH RECEIPTS JOURNAL E-2
E. Posting to the General Ledger
2. Posting totals of the Special Columns Post
to the account named in the column title.
a. Date last day of the month b. Account
Post. Ref. CR (Cash Receipts Journal page
) c. Amount column total d. Balance
calculate new account balance e. General Ledger
Post. Ref. (General Ledger account number in
parentheses below the column total)
20 -10 (p 530)
Contents
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Answer Audit Your Understanding p 531
1. Why are cash and credit card sales recorded
in a Cash Receipts Journal instead of a Sales
Journal? 2. How is a sales discount
calculated? 3. How is the cash receipt amount
for a sale on account with sales tax and sales
discount calculated? 4. Why does the Cash
Receipts Journal have both Dr Cr columns for
Sales Tax Payable?
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III. GENERAL JOURNAL

• A General Journal is used to record all
  transactions which cannot be classified as
  purchases on account, cash payments, sales on
  account, or cash receipts. Purchases and Cash
  Payments Journals were presented in Chapter 19.
• The General Journal used in conjunction with
  special journals contains only General Dr Cr
  columns no special columns are provided.

Contents
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III. GENERAL JOURNAL A
A. Sales Returns Allowances (S R/A) 1. The
Sales Returns Allowances account is a contra
account to Sales therefore the normal balance
side is a debit. 2. Sales Returns value of
merchandise returned by a customer reduces A/R,
Sales, STP 3. Sales Allowances value of a
reduction in price when merchandise sold is
damaged or imperfect without return of the
merchandise 4. Credit memos (CM) are issued for
both returns and allowances because the amounts
are credited to A/R and sub-ledger accounts.
20 -12 (p 533)
Contents
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III. GENERAL JOURNAL B-1
B. Journalizing Sales Returns Allowances
(R/A) Note Requires a 3-line entry 1. First
Line a. Date as shown on credit
memo b. Account Title Sales R/A (spell acct.
name) c. Doc. No. CM (credit memo
number) d. Dr R/A amount 2. Second
Line a. Account Title Sales Tax Payable
b. Dr STP amount (R/A amount STP rate)
20 -13 (p 534)
III. B-2
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III. GENERAL JOURNAL B-2
B. Journalizing Purchases Returns
Allowances 3. Third Line (Indent) a. Account
Title Accounts Receivable/ Customer Account
Name b. Post. Ref. divide diagonally to allow
for posting to both accounts (see a) c. Cr
Amount Sales R/A STP total
20 -13 (p 534)
Contents
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III. GENERAL JOURNAL C-1
C. Journalizing Correcting Entries Affecting
Customer Accounts The source document is a memo
prepared at the time the error is
identified. Note Requires a 2-line entry
1. First Line a. Date memo date b. Account
Title title of account which should have been
charged c. Doc. No. M (memo number) d. Dr
Amount memo amount
20 -14 (p 535)
III. C-2
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III. GENERAL JOURNAL C-2
2. Second Line (Indent) a. Account Title
title of account incorrectly charged (removes
amount) b. Cr Amount memo amount
20 -14 (p 535)
Contents
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III. GENERAL JOURNAL D
D. Posting from a General Journal Note A
General Journal is NEVER ruled! 1. Post each
line of each transaction (in order) 2. For each
line which lists both A/R and the sub- ledger
account, follow all necessary steps to post the
Dr or Cr amount to each account using G (General
Journal page ) as the Post. Ref. 3. The last
step in posting MUST be recording the number of
the account to which an entry was posted in the
Post. Ref. column of the General Journal.
20 -15 (p 537)
Contents
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IV. SCHEDULEACCOUNTS RECEIVABLE

• A Schedule of Accounts Receivable is a listing of
  ONLY the A/R sub ledger ACCOUNTS WHICH HAVE
  BALANCES.
• The total of the A/R sub ledger account balances
  MUST ALWAYS equal the balance of the Accounts
  Receivable (controlling) account.
• A Schedule of Accounts Receivable is always
  prepared at the end of a fiscal period but can be
  prepared at other times as needed.

Illustration
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IV. SCHEDULEACCOUNTS RECEIVABLE
Contents
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V. ORDER OF POSTING FROMJOURNALS
A. Daily Post individual amounts which affect
A/P sub-ledger (vendor) and A/R sub-ledger
(customer) accounts from ALL journals in the
following order 1. Sales Journal 2. Purchases
Journal 3. General Journal 4. Cash Receipts
Journal 5. Cash Payments Journal B. At the End
of Each Month Post ALL special column totals
from ALL journals in the order shown above.
Contents
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Answer Audit Your Understanding p 536
1. What kind of account is Sales Returns and
Allowances? What is its chart of accounts
division? 2. What is the effect on Sales Tax
Payable when a sales return is recorded? 3. What
ledger needs to be corrected if a sale on
account has been journalized and posted to the
wrong customer?
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VI. INTERNATIONAL SALES

• Exports Goods services shipped out of a
  country. Selling to businesses in other
  countries expands a business customer base and
  increases potential sales volumn. Note Sales
  Tax is not applicable on sales to businesses.
• Imports Goods services bought from businesses
  in other countries. Buying from vendors in other
  countries at lower costs than those available in
  the business home country enables a business to
  reduce its cost of merchandise sold and/or
  operating expenses.
• Domestic Sales/Purchases Goods services
  sold/bought from businesses in the business home
  country.

Contents
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VI. INTERNATIONAL SALES A
A. (Problems associated with) International
Sales 1. No uniform commercial laws which
regulate sales transactions and settlement of
disputes. 2. Greater distances from point of
purchase to destination result in increased
transportation costs and delivery
time. 3. Difficulty determining financial
position/ reliability of potential charge
customers. 4. Unknown reliability of vendors
from whom merchandise is ordered. 5. Possible
unstable economic conditions in
vendors/customers countries.
Contents
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VI. INTERNATIONAL SALES B-1
B. Processing Accounting for International
Sales 1. Process steps a. contract of sale
terms accepted by both parties b. letter of
credit issued by buyers bank c. merchandise
shipped by seller d. documents processed
(1) sellers bank prepares and sends to
buyers bank (a) bill of lading (b) comme
rcial invoice (c) bank draft (banks check)
20 -16 (p 539)
VI. B-2
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VI. INTERNATIONAL SALES B-2
B. Processing Accounting for International
Sale 1. Process steps e. payment to sellers
bank buyers bank (1) deducts draft amount
from buyers account (2) sends amount to
sellers bank f. documents processed buyers
bank (1) forwards documents to buyer
who (2) presents bill of lading and letter of
credit to transportation company and receives
merchandise g. payment to sellers bank from
buyers bank deposited in sellers account
20 -16 (p 539)
VI. B-3
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VI. INTERNATIONAL SALES B-3
B. Processing Accounting for International
Sale 2. Entry to record a sight draft (bank
check) for an international sales
transaction Note a memo is prepared as the
source document when the draft is
received. a. Date memo date b. Account
Title ? c. Doc. No. M (memo
number) d. Post. Ref. ? (no General Dr or
Cr) e. Sales Credit draft amount f. Cash
Debit draft amount
Remember There is no STP on sales to businesses.
20 -17 (p 540)
Contents
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VI. INTERNATIONAL SALES C-1
C. Time Drafts 1. A time draft represents an
amount payable at specified future date. 2. A
memo is prepared as the source document when a
time draft is received. 3. 2-line entry to
record a time draft receivable for a same of
merchandise a. First Line (1) Date time
draft date (2) Account Title Time Drafts
Receivable (3) Doc. No. TD (time draft
number) (4) Dr draft amount
20 -18 (p 541)
VI. C-2
38
VI. INTERNATIONAL SALES C-2
C. Time Drafts 3. 2-line entry to record a time
draft receivable for a sale of merchandise b. S
econd Line (1) Account Title Sales (no
STP) (2) Cr draft amount 4. Entry to
record receipt of cash for a time
draft a. Date receipt date b. Account
Title Time Drafts Receivable c. Doc. No. R
(receipt number) d. General Cr payment amount
(draft amount) e. Cash Dr cash received
(draft amount)
20 -18 (p 541)
Contents
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VI. INTERNATIONAL SALES D
D. Trade Acceptances 1. A trade acceptance is a
form (promise) signed by the buyer at the time of
sale which permits the buyer to pay at a
specified future time. 2. Payment for
merchandise sold in this manner is made by the
buyer -- not by the buyers bank. 3. Trade
acceptances are usually used only for domestic
sales to very reliable customers
Contents
40
Answer Audit Your Understanding p 542
1. What kind of receipt can also serve as a
contract for the delivery of merchandise? 2. In
international sales, what is the main concern of
the business that is selling merchandise? 3. In
international sales, what is the main concern of
the business that is purchasing merchandise?
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VII. SUMMARY ILLUSTRATIONS
Contents
42
CREDITS
Based on Century 21 Accounting Ross, Hanson,
et al Southwestern Publishing Company, 1995
Restart Presentation
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