Podcast
Questions and Answers
What happens to the Accounts Receivable balance when merchandise is sold on account and sales tax is also collected?
What happens to the Accounts Receivable balance when merchandise is sold on account and sales tax is also collected?
What should Marris Company record the $1,000.00 sale on account made on May 23?
What should Marris Company record the $1,000.00 sale on account made on May 23?
Sales journal
What is the amount recorded in the Accounts Receivable amount column of a sales journal for a sale on account of $1,000.00 plus sales tax of $80?
What is the amount recorded in the Accounts Receivable amount column of a sales journal for a sale on account of $1,000.00 plus sales tax of $80?
$1,080.00
How is the amount of sales tax on a sale calculated?
How is the amount of sales tax on a sale calculated?
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Why should a business post sales on account transactions to the accounts receivable subsidiary ledger frequently?
Why should a business post sales on account transactions to the accounts receivable subsidiary ledger frequently?
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What is the amount of cash received for a sale on account of $1,080.00 when cash is received within the 2% discount period?
What is the amount of cash received for a sale on account of $1,080.00 when cash is received within the 2% discount period?
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When do most businesses receive cash for credit and debit card sales?
When do most businesses receive cash for credit and debit card sales?
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What do the credit terms 2/10, n/30 mean?
What do the credit terms 2/10, n/30 mean?
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Study Notes
Accounts Receivable Overview
- Accounts Receivable increases when merchandise is sold on account, including sales tax collection.
- It represents money owed to a business for credit sales, reflecting customer purchases.
Recording Sales
- For Marris Company, a $1,000.00 sale on account occurred on May 23, recorded in the sales journal.
- The customer's payment on June 6 involves updating the accounts receivable records accordingly.
Sales Amount and Tax Calculation
- On a $1,000.00 sale with an $80 sales tax, the total entered in the Accounts Receivable column is $1,080.00.
- Sales tax is computed by multiplying the price of goods by the applicable sales tax rate.
Importance of Posting Transactions
- Regularly updating the accounts receivable subsidiary ledger ensures accurate and current customer account balances.
- Frequent postings help track customer payments and manage credit effectively.
Cash Discounts
- If cash is received promptly, a 2% discount applies, adjusting the amount to $1,058.00 from a total sale of $1,080.00 during the discount period.
- This encourages quicker payments from customers and improves cash flow.
Timing for Cash Receipts
- Businesses typically receive cash for credit and debit card transactions within 2-3 business days after batch processing.
- Timely cash flow is crucial for business operations and financial planning.
Credit Terms Explanation
- The term "2/10, n/30" indicates a 2% discount is available if the amount is paid within 10 days; otherwise, the net amount is due in 30 days.
- Understanding credit terms aids businesses in setting payment expectations and managing accounts receivable effectively.
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Description
Test your knowledge on accounts receivable, including how sales on account are recorded and how sales tax is calculated. This quiz covers essential concepts such as cash discounts and the importance of updating records for accurate customer balances.
