Accounting 101 Chapter 7 Accounting for Sales, Accounts Receivable and Cash Receipts

"Sales tax Payable" is an account classified as a liability that normally carries a _______ balance.

Credit

"Sales Returns and Allowances" "Sales Discounts" are contra accounts that normally carry a ________ balance.

Debit

A sale made to a customer using a bank credit card (Visa/Mastercard) is posted to which accounts? The customer is not subject to sales tax, and their trade discount was computed and applied at the point of sale.

Debit to Cash; Credit to Sales

"Credit Card Expense" is an account classified under _________, and normally carries a Debit Balance

Expenses

Retail Business

A business that sells directly to retail customers

Manufacturing Business

A business that sells goods it has produced

Merchandising Business

A business that sells goods purchased for resale. Often a wholesaler that sells merchandise for a retailer to stock their stores.

Service Business

A business that sells services

"Sales Discount" account

A contra revenue account where early payment discounts are recorded. If the terms for an invoice was set at 1/10, n/30, the customer is being offered a 1% discount for amounts on the invoice paid within 10 days of purchase, with the full amount due within 30 days of purchase. the 1% discount

Subsidiary Ledger

A ledger separate from and subsidiary to the general ledger. Subsidiary ledgers are dedicated to accounts of a single type and show details to support a general ledger account. Two examples examples of subsidiary ledgers are the" accounts receivable" subsidiary ledger and the "accounts payable" subsidiary ledger.

Schedule of accounts receivable

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

Credit Memorandum (Credit Memo)

A physical note or printable electronic document verifying that a customer's account is to be credited. This document will have it's own unique number, and will state the customer account name, the dollar amount of the credit to be applied, and the reason for the credit (example: return of merchandise, or a sales allowance for services not performed fully) The memo will reference the original invoice or sales slip number that was issued at the point of sales, and will usually require a signature from management.

Trade Discount

A reduction (or series of reductions) from list price. These are usually given to modify a retail price to wholesale . If listed in a series, the first discount is taken off of list price, then the next discount is taken off of the remaining price. For example, if the list price is 1,000, and the stated trade discounts are 30 and 20 percent, the list price is first reduced by 30 percent (so balance= 700.) then 20 percent is taken off of that balance (700 -20%= 560). The

Sales Allowance

A reduction in the price that was originally charged to the customer.

Accounts Receivable Ledger

A subsidiary ledger which contains customer's credit accounts

Open-account Credit

A system that allows the sale of services or good with the understanding that payment will be made at a later date. Credit offered by the store itself, rather than by banks.

Contra Revenue Account

An account with a debit balance which is contrary to the normal balance for a revenue account. An example of a contra revenue account is the Sales returns and allowances accounts. This account is debited, rather than the sales account when an item is returned.

"Sales" "Sales Returns and Allowances" " Sales Discounts" are all accounts or contra accounts classified under ______________

Revenue

Credit Terms (Terms)

Rules for payment by buyer for items purchased on credit. n/30 means the balance on a particular invoice is due 30 calendar days from the day of purchase.

Net Sales

The difference between the balance in the "Sales" account and the balance in the" Sales Returns and Allowances" account and the "Sales Discount" account.

List Price

The established retail price.

An account in the general ledger who's balance is the summary of the accounts related to it in the subsidiary ledger is called a CONTROL account.

True