Accounting for Sales and Accounts Receivable

2. Chapter 7 Accounting for Salesand Accounts Receivable Section 2: Accounts Receivable Section Objectives 3. Post from the sales journal to the customers’ accounts in the accounts receivable subsidiary ledger. 4. Record sales returns and allowances in the general journal. 5. Post sales returns and allowances. 6. Prepare a schedule of accounts receivable.

3. Accounts receivable represents a substantial asset for many businesses. This asset must be converted into cash in a timely manner.

4. The Accounts Receivable Ledger

5. QUESTION: What is an accounts receivable ledger? ANSWER: An accounts receivable ledger is a subsidiary ledger that contains credit customer accounts.

6. An accounts receivable ledger: • Makes it possible to verify that customers are paying their balances on time and that they are within their credit limits • Provides a convenient way to answer questions from customers regarding their current balances or about a possible billing error

7. The Accounts Receivable Ledger NAME Roy Anderson ADDRESS 8913 South Hampton, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20 -- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00 • The accounts receivable ledger has three money columns. • The BALANCE column is presumed to contain debit amounts.

8. Postings to the accounts receivable ledger are usually made daily so that the customer accounts can be kept up to date at all times.

9. Posting a Credit Sale

10. Objective 3 Post from the sales journal to the customer’s accounts in the accounts receivable subsidiary ledger.

11. Each credit sale recorded in the sales journal is posted to the appropriate customer’s account in the accounts receivable ledger.

12. 3 2 1 The date, the sales slip number, and the page number are entered from the sales journal. SALES JOURNAL PAGE 1 SALES ACCOUNTS SALES TAX DATE SLIP CUSTOMER’S POST. RECEIVABLE PAYABLE SALES NO. ACCOUNT DEBITED REF. DEBIT CREDIT CREDIT 20-- Jan. 3 1101 Roy Anderson 432.00 32.00 400.00 NAME Roy Anderson ADDRESS 8913 South Hampton, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20 -- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00

13. 3 2 1 4 The amount the customer owes is taken from the Accounts Receivable Debit column of the sales journal and is entered in the Debit column of the customer’s account. SALES JOURNAL PAGE 1 SALES ACCOUNTS SALES TAX DATE SLIP CUSTOMER’S POST. RECEIVABLE PAYABLE SALES NO. ACCOUNT DEBITED REF. DEBIT CREDIT CREDIT 20-- Jan. 3 1101 Roy Anderson 432.00 32.00 400.00 NAME Roy Anderson ADDRESS 8913 South Hampton, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20 -- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00

14. 3 2 1 4 5 The new balance is determined and recorded. SALES JOURNAL PAGE 1 SALES ACCOUNTS SALES TAX DATE SLIP CUSTOMER’S POST. RECEIVABLE PAYABLE SALES NO. ACCOUNT DEBITED REF. DEBIT CREDIT CREDIT 20-- Jan. 3 1101 Roy Anderson 432.00 32.00 400.00 NAME Roy Anderson ADDRESS 8913 South Hampton, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20 -- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00

15. 6 3 2 1 4 5 To show that the posting to a customer’s account has been completed, a check mark is entered in the Posting Reference column of the sales journal. SALES JOURNAL PAGE 1 SALES ACCOUNTS SALES TAX DATE SLIP CUSTOMER’S POST. RECEIVABLE PAYABLE SALES NO. ACCOUNT DEBITED REF. DEBIT CREDIT CREDIT 20-- Jan. 3 1101 Roy Anderson  432.00 32.00 400.00 NAME Roy Anderson ADDRESS 8913 South Hampton, Dallas, Texas 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20 -- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00

16. Posting Cash Received on Account

17. When a credit customer pays an outstanding bill, the cash collected is first recorded in a cash receipts journal. Let’s put it in the CASH RECEIPTS JOURNAL

18. The cash is then posted to the individual customer account in the accounts receivable ledger. NAME Roy Anderson ADDRESS 8913 South Hampton Road, Dallas, TX 75232-6002 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. DEBIT CREDIT 20 -- Jan. 1 Balance  432.00 3 Sales Slip 1101 S1 432.00 864.00 7 CR1 432.00 432.00 Posted from page 1 of the cash receipts journal

19. Thank You for using College Accounting, 11th Edition Price • Haddock • Brock