Journalizing Sales and Cash Receipts

Purchasing and Sales of merchandise are the two major activities of a merchandising business.

Customer--A person or business to whom merchandise or services are sold.

Sales Tax--A tax on a sale of merchandise or services.  Most state or local laws require a tax be collected on sales.

Every business must keep accurate records of the amount of tax collected.  Businesses must file reports with the proper government agency.  Records need to show total sales and the total sales tax.  The amount of sales tax collected by a company is a liability until paid to the state government.  Therefore, a separate liability account Sales Tax Payable is used.  It has a normal credit balance.

JOURNALIZING SALES AND CASH RECEIPTS FOR SALES

A sale of merchandise may be for cash or on account.  A sale of merchandise increases the revenue of a business.  Regardless of when payment is made, revenue is recorded at the time of the sale.(Concept:  Realization of Revenue)

CASH AND CREDIT CARD SALES

Cash Sale--A sale in which cash is received for the total amount of the sale at the time of the sale.

Credit Card Sale--A sale in which a credit card is used for the total amount of the sale at the time of the transaction.

Cash and credit card sales are both revenue items that increase the revenue account sales.

A cash register tape is used to document the a cash and credit card sale.---T means cash register tape and the number given to the tape is the date thus T7.

SALES ON ACCOUNT

Sale on Account--A sale for which cash will be received at a later date.

Sales Invoice-An invoice used to document sales on account may also be referred to as a sales ticket or sales slip.

Invoice--A form that describes good sold, the quantity, and the price

Transaction:  Accounts Receivable/Name of Customer debited while sales and sales tax payable are credited.
The debit and credit amounts are recorded in special amount columns, Therefore, writing the tiles of the ledger accounts in the Account Title column is not necessary, However, the name of the customer is written in the Account Title to show from whom the amount is due.

CASH RECEIPTS ON ACCOUNT

A cash receipt on account transaction decreases the amount to be collected from a customer.  this transaction increases the cash account balance and decreases the accounts receivable account balance.  A receipt is prepared to document this transactions.  This is done in duplicate--the original is given to the customer and the copy is used for the source document.

PROVING A JOURNAL

A journal is proved and ruled whenever a journal page is filled and always at the end of the month.  Proving is checking debits equal credits.

PROVING CASH

Beginning cash balance on hand plus cash received during the period (cash debit total) equals Total Cash available minus cash paid out (cash credit total) equals cash balance on hand at the end of the month which should equal your checkbook balance.