Section 3 Analyzing Cash Receipt Transactions What Youll

Section 3 Analyzing Cash Receipt Transactions What You’ll Learn = How to record cash receipt transactions. = The use of the Sales Discounts account, and its rules of debit and credit.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Why It’s Important It is essential to understand the various ways that businesses receive cash and how to record the receipt of cash. Key Terms = cash receipt = cash discount = cash sale = sales discount = bankcard

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Kinds of Cash Receipts þ payments from charge customers þ cash sales þ bankcard sales

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Cash Sales = The business receives full Cash Sales payment for merchandise sold at the time of the sale. = Most retailers use a cash register to record cash sales. Sales Tax

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Cash from Charge Customers = Businesses record cash received on account from charge customers by preparing receipts. = Receipts are pre-numbered and may be prepared in multiple copies. = The receipt is a source document for the journal entry.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Bankcard Sales = A bankcard is issued by a bank and honored by many businesses. = Bankcard sales are recorded as though they are cash sales. Bankcard Sales Tax

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Cash Discounts = A cash discount, or sales discount, is the amount a customer can deduct from the amount owed for purchased merchandise if payment is made within a certain time. = Terms 2/10, n/30 means that the customer can deduct 2% of the cost of merchandise if payment is made within 10 days of the sale date. Otherwise, the full (net) amount is due within 30 days.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Cash Discount Transactions On December 3, On Your Mark sold $1, 500 worth of merchandise on account to South Branch High School Athletics. If South Branch pays within 10 days (by December 13), On Your Mark will receive $1, 470, or the original price less the cash discount of $30.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Cash Discount Transactions (cont'd. ) 1. Merchandise Sold $1, 500 X Discount Rate = Discount X . 02 = $30 2. Sales Slip Amount – Discount Amount $1, 500 – $30 Amount Paid Within Discount = Period = $1, 470

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Recording Cash Received from Charge Customers Business Transaction On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. ANALYSIS Identify 1. The accounts affected are Cash in Bank, Accounts Receivable (controlling), and Accounts Receivable—Casey Klein (subsidiary).

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Recording Cash Received from Charge Customers (cont'd. ) Business Transaction (cont'd. ) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. ANALYSIS Classify 2. Cash in Bank, Accounts Receivable (controlling), and Accounts Receivable—Casey Klein (subsidiary) are asset accounts.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Recording Cash Received from Charge Customers (cont'd. ) Business Transaction (cont'd. ) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. ANALYSIS + / – 3. Cash in Bank is increased by $212. Accounts Receivable (controlling) and Accounts Receivable—Casey Klein (subsidiary) are decreased by $212.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Recording Cash Received from Charge Customers (cont'd. ) Business Transaction (cont'd. ) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. DEBIT-CREDIT RULE 4. Increases to asset accounts are recorded as debits. Debit Cash in Bank for $212. 5. Decreases to asset accounts are recorded as credits. Credit Accounts Receivable (controlling) for $212. Also credit Accounts Receivable—Casey Klein (subsidiary) for $212.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Recording Cash Received from Charge Customers (cont'd. ) Business Transaction (cont'd. ) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. T ACCOUNTS 6. Cash in Bank Debit + 212 Credit – Accounts Receivable Debit + Credit – 212 Accounts Receivable Subsidiary Ledger Casey Klein Debit Credit + – 212

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Recording Cash Received from Charge Customers (cont'd. ) Business Transaction (cont'd. ) On December 5, On Your Mark received $212 from Casey Klein to apply to her account, Receipt 301. JOURNAL ENTRY 7.

Section 3 Analyzing Cash Receipt Transactions (cont'd. ) Check Your Understanding Explain the benefits of a cash discount.