glencoe_accounting_chp14.pdf - CHAPTER 14 Accounting for...

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CHAPTER 14 Accounting for Sales and Cash Receipts What You’ll Learn Explain the difference between a service business and a merchandising business. 1. What does the chapter title tell you? 2. What do you already know about this subject from personal experience? 3. What have you learned about this in the earlier chapters? 4. What gaps exist in your knowledge of this subject? Analyze transactions relating to the sale of merchandise. Explain the difference between a retailer and a wholesaler. Record a variety of sales and cash receipt transactions in a general journal. Define the accounting terms introduced in this chapter. 2. 3. 4. 5. Why It’s Important As a consumer, you have frequent contact with merchandising businesses. Underground Station If you are looking for the latest in urban-savvy footwear, Underground Station has you covered. From Puma to Fila, Phat Farm to GBX, this store has the brands that can take you from the basketball court to the dance floor. Until recently Underground Station retail stores were found exclusively in malls. This changed with the grand opening of a large “street store” in the main shopping district in the heart of Brooklyn, New York. With the popularity of the brands it carries, Underground Station thinks the new sales strategy will be a good fit. Underground Station wants to attract more women shoppers in the coming years. The company hopes that a new advertising campaign and more cutting-edge buyers in the shoe division will do the trick. What Do You Think? When shoppers purchase shoes at Underground Station, what general ledger accounts do you think are affected? ANALYZING SALES Exploring the Real World of Business B EFORE Y OU READ Predict 1. What does the chapter title tell you? 2. What do you already know about this subject from personal experience? 3. What have you learned about this in the earlier chapters? 4. What gaps exist in your knowledge of this subject? 378 Chapter 14 Accounting for Sales and Cash Receipts
Making sales is key to the financial success of a business. Sales dollars come from selling products or services to customers. Companies like Underground Station, Target, and Foot Locker buy merchandise and sell it to customers. Accurate tracking of sales transactions helps these businesses decide what merchandise to offer. Journalizing cash receipts is an essential part of recording sales revenue. Personal Connection 1. Does your work or the work of friends or family involve selling merchandise? 2. What information from these sales do you think should be recorded in the accounting records? Online Connection Go to glencoeaccounting.glencoe.com and click on Student Center. Click on Working in the Real World and select Chapter 14. Working in the Real World APPLYING YOUR ACCOUNTING KNOWLEDGE 379 glencoeaccounting.glencoe.com
S E C T I O N 1 Accounting for a Merchandising Business As you remember, a service business is one that provides a service to the public for a fee. In contrast a merchandising business buys goods (such as computers, clothing, and furniture) and then sells those goods to customers for a profit. You’re probably familiar with merchandising businesses like Tower Records or Wal-Mart. Most merchandising busi- nesses operate

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