ACC291 Week 1 Chapter 7.rtf - ACC291 WEEK 1 CHAPTER 7 ACCOUTING FOR SALES ACCOUNTS RECEIVABLE AND CASH RECEIPTS LEARNING OBJECTIVES 1 Record sales on

ACC291 Week 1 Chapter 7.rtf - ACC291 WEEK 1 CHAPTER 7...

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ACC291 WEEK 1 CHAPTER 7 ACCOUTING FOR SALES, ACCOUNTS RECEIVABLE, AND CASH RECEIPTS LEARNING OBJECTIVES 1. Record sales on account, credit card sales, sales returns, sales allowances, and cash receipt transactions in a general journal 2. Compute trade discounts 3. Compute and record cash discounts on sales 4. Post from the general journal to the general ledger accounts and to the subsidiary ledger 5. Prepare a schedule of accounts receivable 6. Record the payment of sales taxes 7. Define the accounting terms new to this chapter. SECTION 1 - UNDERSTANDING MERCHANDISING COMPANIES When a chart of accounts is developed for a firm, one important consideration is the nature of the firm's operations. The 3 basic types of businesses are a SERVICE BUSINESS (a business that sells services) which sells services, a MERCHANDISING BUSINESS (business that sells goods purchased for sale) which sells goods that it purchases for resale, and a MANUFACTURING BUSINESS (business that sells goods that it has produced) which sells goods that it produces. In this section, we learn to record transactions for a retailer. We will use a general journal to record transactions. Later, we will learn to post transactions from the general journal to the general ledger and the SUBSIDIARY LEDGER (a ledger dedicated to accounts of a single type and showing details to support a general ledger account). A subsidiary ledger is a ledger that contains accounts of a single type, such as customers or vendors. Finally, we will focus on recording transactions for a wholesaler.
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Trayton Eli's Consulting Services, the firm that was described in Chapters 2 thorugh 6, is a service business. The firm we will examine next, Maxx-Outt Sporting Goods, is a merchandising business that sells the latest sporting goods and sportswear for men, women, and children. It is a RETAIL BUSINESS (a business that sells directly to individual consumers). It sells goods and services directly to individual customers. Maxx-Outt Sporting Goods is a sole proprietorship owned and managed by Max Ferraro, who was formerly a sales manager for a major retailing chain. Due to relatively small size of its operations, Maxx-Outt Sporting Goods does not keep track of its inventory daily. Maxx-Outt Sporting Goods uses a PERIODIC INVENTORY SYSTEM (inventory sysytem in whcih the merchandise inventory balance is only updated when a physical inventory is taken). In a periodic inventory system, the cost of inventory on hand must be determined by counting merchandise inventory in stock. Larger businesses need to know the number of units and the unit cost for inventory on hand at all times. These businesses use a PERPETUAL INVENTORY SYSTEM (inventory system that tracks the inventories on hand at all times). In a perpetual inventory system, the amount of inventory on hand is adjusted for each sale, purchase, or return. Electronic equipment, such as point-of- sale cash registers and scanners, help track inventory balances. The accounting for a perpetual system is discussed in the appendix to Chapter 8.
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  • Spring '12
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