CHAPTER 7:: Accounting for SALES and ACCOUNTS RECEIVABLE

manufacturing business (190)

A business that sells that sell goods it has produced

Invoice (206)

A costumer billing for merchandise bought on credit

What is a subsidiary ledger? give two examples of subsidiary ledgers.

A ledger that contains accounts of a single type. Examples are: the account receivable ledger, and the accounts payable ledger.

Schedule of accounts receivable (203)

A listing of all balances of the accounts in the accounts receivable subsidiary ledger

Why is a small merchandising business usually need a more complex set of financial records and statements than a small service business?

A merchandising business must account for the purchase and sale of goods and for its merchandise inventory .

Credit memorandum (198)

A note verifying that a customer's account is being educed by the amount of a sales return or sales allowance plus any sales tax that made have been involved

Trade discount (205)

A reduction from list price

Sales allowance (198)

A reduction in the price originally charged to costumers for goods or services

What is sales return? What is a sales allowance?

A sales return results when a costumer returns goods and the firm takes them back. A sales allowance results when the firm gives a costumer a reduction in the price of the good or service.

Explain how service, merchandising, and manufacturing businesses differ from each other?

A services business sells services; a merchandising business sells goods that it has produced.

Sales journal (190)

A special journal used to recall sales of merchandise on credit

Accounts receivable ledger (197)

A subsidiary ledger that contains credit costumer accounts.

Where would you report net sales?

Income statement

Which of the following is not a reason to use a sales journal?

Increases credit sales

Which accounts are kept in the account receivable ledger?

Individuals accounts for all credit costumers

What is a control account?

Is an account that serves as a link between a subsidiary ledger because its balance summarizes the balances of the accounts in the subsidiary ledger.

Why is it useful for a firm to have an accounts receivable ledger?

It contains detailed information about the transaction with credit costumers and shows the balances owed by a credit costumers at all the time.

What is the difference between list price and net price?

List price is the stablished retail price of an item; Net prices is the amount left after all trade discounts are subtracted from the list price.

What factors would you consider in deciding whether or not to extend credit to a costumer?

Possible factors are: payment history, amount of current debt, amount of potential debt (available credit cards), employment history, salary, references from other creditors.

Charge - accounts sales (208)

Sales made through the use of open-account credit or one of various types of credit cards.

What type of transaction is recorded in the sales journal?

Sales of merchandise on credit

What accounts is used to record sales tax owed by a business to a city or state?

Sales tax payable is the account used to record the liability for sale taxes to be paid in the future.

Types of business operations are:

Service, merchandising, manufacturing.

Sales return (198)

A firm's acceptance of a return of goods from a costumer

Which of the following general ledger accounts would appear in a sales returns and allowances journal?

1. Sales Returns and Allowances, 2. Sales Tax Payable, 3. Accounts receivable

What are four type of credit sales?

1. open-account credit, 2. business credit card sales, 3. bank credit card sales 4. credit card company sales

Sales Returns ad allowances (199)

A contra revenue account where sales returns and sales allowances are recorded; sales returns and allowances are substrates from sales to determine net sales

Wholesale business (205)

A business that manufactures or distributes goods to retail businesses or large consumers such as hotels and hospitals

Retail business (190)

A business that sales directly to individual consumers

Merchandising business (190)

A business that sells goods purchased for resale.

What is a special journal? Give four examples of special journals.

A journal that is used to record only one type of transaction. Examples are: the sales journal, the purchases journal, the cash receipts journal and the cash payments journal.

Service business (190)

A journal used tor record only one type of transaction

Subsidiary ledger (190)

A ledger dedicated to accounts of a single type and showing details to support a general ledger account

Control account (203)

An account that links a subsidiary ledger and the general ledger since its balance summarizes the balances of the accounts in the subsidiary ledger

Contra revenue account (199)

An account with a debit balance, which is contrary to the normal balance for a revenue account.

List price (205)

An stablished retail price

What are net sales?

Sales minus sales returns

Net sales (201)

The difference between the balance in the sales account and the balance in the Sales Returns and Allowances accounts

Net price (205)

The list price less all trade discounts

Name the two different time periods usually covered in sales tax returns:

The month and the quarter.

Merchandise inventory (190)

The stock of goods a merchandising business keeps on hand

Open-account credit (208)

The system that allows the sales of services or goods with the understanding that payment will be made at later date