10–1 McQuaig Bille 1 College Accounting 10 th Edition McQuaig Bille Nobles © 2011 Cengage...
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Transcript of 10–1 McQuaig Bille 1 College Accounting 10 th Edition McQuaig Bille Nobles © 2011 Cengage...
10–1McQuaig Bille
11College Accounting10th Edition
McQuaig Bille Nobles
© 2011 Cengage Learning
PowerPoint presented by Douglas Cloud Professor Emeritus of Accounting, Pepperdine University
Chapter 10
Cash Receipts and Cash Payments
10–2
Credit TermsCredit Terms
The credit period is the time the seller allows the buyer before full payment has to be made.
A cash discount is an amount that a customer can deduct if a bill is paid within a specified time.
The discount is based on the total amount of the invoice after any returns and allowances and freight charges on the invoice have been deducted.
1/15, n/60: The seller offers a 1 percent discount if the bill is paid within 15 days after the invoice date.
2/10, EOM, n/60: The seller offers a 2 percent discount if the bill is paid within 10 days after the end of the month, and the whole bill must be paid within 60 days after the last day of the month.
10–3
Sales DiscountsSales Discounts
Transaction (b). On August 10, received check from Mesa River Raft Company for $1,894.83 in payment of invoice no. 9384, less discount of $38.67.
$1,933.50 x .02
10–4
Sales DiscountsSales Discounts
10–5
Sales ReturnsSales Returns
Transaction (a). On September 1, Whitewater Raft Supply sold merchandise on account to Rugged River Company, $3,614, invoice no. 9391, terms 2/10, n/30.
10–6
Sales ReturnsSales Returns
Transaction (b). On September 5, Rugged River Company returned $254 worth of the merchandise. Whitewater Raft Supply issued credit memorandum no. 1069 and recorded the transaction.
10–7
Sales ReturnsSales Returns
Transaction (c). On September 8, received a check from Rugged River Company for $3,292.80 in payment of invoice no. 9391, less return and cash discount.
($3,614 ‒ $254) x .02
10–8
Sales ReturnsSales Returns
10–9
No Sales Discount InvolvedNo Sales Discount Involved
Transaction (a). On April 1, Blue Merchandise Company sold merchandise on account to Yellow Company, invoice no. 1294, $9,540, terms 2/10, n/30, and recorded the sale in the general journal.
10–10
No Sales Discount InvolvedNo Sales Discount Involved
Transaction (b). On April 26, received check from Yellow Company for $9,450 in payment of invoice no. 1294.
Since Yellow Company did not make payment within 10 days, the discount was
not applied to the invoice amount.
10–11
Posting to the General Ledger and Subsidiary Ledger—A Computerized Approach
Posting to the General Ledger and Subsidiary Ledger—A Computerized Approach
Most computer accounting software allows businesses to post cash receipts for sales and apply discounts.
Here, cash receipt of $1,894.83 in payment of invoice no. 9384 is recorded into the accounting software.
10–12
The accountant records the discount into the system.
10–13
After the discount has been applied, the invoice now shows as paid, and the balance due is $0.00.
10–14
The Purchase Discounts account, like Purchases Returns and Allowances, is a contra account.
The Purchase Discounts account is treated as a deduction from Purchases on the buyer’s income statement.
Purchase DiscountsPurchase Discounts
10–15
Purchase DiscountsPurchase Discounts
Transaction (a). On August 2, Whitewater Raft Supply bought merchandise on account from Pataponia, Inc., invoice no. 2706, $1,710; terms 2/10, n/30; dated July 31; FOB San Francisco, freight prepaid and added to the invoice, $85.50.
10–16
Purchase DiscountsPurchase Discounts
Transaction (b). On August 8, issued Ck. No. 2076 to Pataponia, Inc., in payment of invoice no. 2706, less cash discount of $34.20, $1,761.30.
$1,710 x .02The cash payment was determined as follows: $1,710 ‒ $34.20 + $85.50
(continued)
10–17
Purchase DiscountsPurchase Discounts
10–18
No Purchase Discounts Involved No Purchase Discounts Involved
Transaction (a). On November 1, Blue Merchandise Company bought merchandise on account from Grey, Inc., invoice no. 3901, $4,600; terms 2/10, n/30, dated October 31.
10–19
No Purchase Discounts Involved No Purchase Discounts Involved
Transaction (b). On November 28, issued Ck. No. 1151 to Grey, Inc., in payment of invoice no. 3901, $4,600.
Computerized Approach to PostingComputerized Approach to Posting The accountant records the payment of the invoice
by selecting the correct invoice due.
The bill payment check screen shows that payment has been applied to the invoice.
Computerized Bill PaymentComputerized Bill Payment
10–22
Partial Income StatementPartial Income Statement
10–23
Trade DiscountsTrade Discounts
Manufacturers and wholesalers publish catalogs listing their products at retail prices.
These organizations offer their customers substantial reductions, called trade discounts, from the list prices.
Trade discounts are not journalized because they are not related to cash payments.
Manufacturers and wholesalers use trade discounts to avoid the high cost of reprinting catalogs when selling prices change.
Neither the seller nor the buyer records trade discounts in the accounts; they enter only the selling price.
10–24
Trade Discounts as a Chain of PercentagesTrade Discounts as a Chain of Percentages
A distributor of automobile parts grants discounts of 30 percent, 10 percent, and 10 percent off the listed catalog price of $900.
List or catalog price $900.00Less 1st trade discount of 30% 270.00Remainder after 1st discount $630.00Less 2nd trade discount of 10% 63.00Remainder after 2nd discount $567.00Less 3rd trade discount of 10% 56.70Selling price $510.30
10–25
Seller’s TransactionsSeller’s Transactions
Buyer’s TransactionsBuyer’s Transactions
10–26
Purchases and Sales TransactionsPurchases and Sales Transactions
10–27
A cash receipts journal contains all transactions in which cash is received, or increased.
When a cash receipts journal is used, all transactions in which cash is debited must be recorded in it.
A cash receipts journal may be used for a service as well as a merchandising business.
The Cash Receipts JournalThe Cash Receipts Journal
10–28
Oct. 1 Sold merchandise on account to Green River Rafts, invoice no. 10050, $3,500; terms 2/10, n/30.
Cash Receipts in the General JournalCash Receipts in the General Journal
10–29
Oct. 4 Sold merchandise, $500, and the customer used a credit card. The bank charges 4 percent for credit card transactions.
Cash Receipts in the General JournalCash Receipts in the General Journal
$500 x .04
10–30
Oct. 5 Collected cash on account from I. R. Ray, a charge customer, $416.
Cash Receipts in the General JournalCash Receipts in the General Journal
10–31
Oct. 8 Sold equipment for cash at cost, $500.
Cash Receipts in the General JournalCash Receipts in the General Journal
10–32
Oct. 10 Received a check from Green River Rafts for $3,430 in payment of invoice no. 10050, less cash discount.
Cash Receipts in the General JournalCash Receipts in the General Journal
$3,500 x .02
10–33
Oct. 15 Cash sales for first half of the month, $2,460.
Cash Receipts in the General JournalCash Receipts in the General Journal
10–34
Cash Receipts JournalCash Receipts Journal
Now, let’s record the same transaction that impact cash receipts in a cash receipts journal.
The entry of October 1 does not involve cash, so it is not entered in the cash receipts journal.
Cash was received on October 4, so the sale of merchandise involving a credit card is entered in the cash receipts journal.
10–35
Cash Receipts JournalCash Receipts Journal
Notice that the entry was easier to journalize using the special journal.
On October 5, $416 was collected on account from L.R. Ray, a charge customer.
The “Account Credited” column is used to identify the customer who made the payment.
10–36
Cash Receipts JournalCash Receipts Journal
Identifying Accounts Receivable in the “Account Credited” column would provide no additional information since the special column, “Accounts Receivable Credit” provides this information.
10–37
Cash Receipts JournalCash Receipts Journal
On October 7, the owner, D. M. Bruce, invested $9,000 in the business.
In this entry, the “Account Credited” column is used to identify the $9,000 in “Other Accounts Credit” credit as a credit to D. M. Bruce, Capital for $9,000.
10–38
Cash Receipts JournalCash Receipts Journal
10–39
Cash Receipts JournalCash Receipts Journal
Here are some other transactions made during the month that involved cash.
Oct. 16Received a check from Floyd Mercantile for $1,366.12 in payment of invoice no. 10052, less cash discount ($1,394.00 – $27.88 = $1,366.12).17Borrowed $9,000 from the bank, receiving cash and giving the bank a promissory note.21Received check from Hartman Guides for $3,696.80 in payment of invoice no. 10055, less discount ($3,772.24 – $75.44 = $3,696.80).30Received a check from Bowers River Co. for $1,710.00 in payment of invoice no. 10054. (This is longer than the 10-day period, so the cash discount is not allowed.)31Cash sales for second half of the month, $2,620.
10–40
Cash Receipts JournalCash Receipts Journal
Notes Payable is used instead of Accounts Payable because a promissory note was issued.
10–41
Posting from the Cash Receipts Journal
Posting from the Cash Receipts Journal
10–42
Proving the Cash Receipts Journal Totals
Proving the Cash Receipts Journal Totals
Debit Totals Credit Totals
Cash $34,678.92 Accounts Receivable $10,792.24Credit Card Sales 5,580.00 Expense 20.00 Other Accounts 18,000.00Sales Discounts 173.32
$34,872.94 $34,872.24
10–43
Advantages of Using a Cash Receipt Journal
Advantages of Using a Cash Receipt Journal
1. Transactions generally can be recorded on one line.
2. All transactions involving debits to Cash are recorded in one place.
3. It eliminates much repetition in posting when there are numerous transactions involving Cash debits.
4. Special columns can be used for specialized transactions and posted as one total.
10–44
The Cash Payments JournalThe Cash Payments Journal
The cash payments journal is a special journal used to record all transactions in which cash goes out, or decreases.
When the cash payments journal is used, all transactions in which cash is credited must be recorded in it.
The cash payments journal may be used for either a service or a merchandising business.
10–45
Cash Payments JournalCash Payments Journal
Oct. 2 Bought merchandise on account from Pataponia, Inc., invoice no. 2746, $2,500; terms 2/10, n/30; dated September 30; FOB San Francisco, freight prepaid and added to the invoice, $100.25.
No cash is involved in this transaction, so the entry is not recorded in the cash payments journal.
10–46
Cash Payments JournalCash Payments Journal
Oct. 10 Paid cash for liability insurance, Ck. No. 2227, $4,890.
Oct. 8 Issued Ck. No. 2226 to Pataponia, Inc., in payment of invoice no. 2730, less cash discount of $50.00, $2,550.25.
10–47
Cash Payments JournalCash Payments JournalOct. 12 Paid wages for two weeks, Ck. No. 2228, $6,220.
Oct. 14 Paid rent for the month, Ck. No. 2229, $2,950.
10–48
10–49
$21,125.25 $21,125.25=
Cash Payments JournalCash Payments Journal
10–50
Debit Totals Credit Totals
Accounts Payable $ 5,004.25 Cash $21,060.97Other Accounts 16,121.00 Purchases Discounts 64.28
$21,125.25 $21,125.25
Proving the Cash Payments Journal Totals
Proving the Cash Payments Journal Totals
10–51
Advantages of Using a Cash Payments Journal
Advantages of Using a Cash Payments Journal
1. Transactions generally can be recorded on one line.
2. All transactions involving credits to Cash are recorded in one place.
3. It eliminates much repetition in posting when there are numerous transactions involving Cash credits.
4. Special columns can be used for specialized transactions and posted as one total.
Usi
ng S
peci
al J
ourn
als
Usi
ng S
peci
al J
ourn
als
10–53
Recommended Order of Posting Recommended Order of Posting
1. Sales journal
2. Purchases journal
3. Cash receipts journal
4. Cash payments journal