• Once an order is generated, indi creates a customized garment and ships it to the customer for free
within 4 weeks.
• All orders come with a Perfect Fit Promise and Worry-Free Shopping Guarantee, which promises fit
adjustments until 100% satisfaction or customer’s money back.
• The average price for a pair of indi jeans is $185.
• indiTailored – sister company to indi – offers customers in search of the perfect dress shirt the same
customization, fit and delivery options as indieDenim.
• Customer dissatisfaction: Businesses who extend credit to their customers risk customer
dissatisfaction if accounts are not updated frequently.
• Ineffective collection efforts: Effective accounts receivable collection efforts rely on accurate
account balances.
• Cash flow: Negative cash flow situations may stem from improper maintenance of accounts
receivable or from delayed accounts receivable billings.
1. Retail: sell goods directly to consumers. Wholesale: sell goods to retailers.
3. Subtract balance of Sales Returns and Allowances from balance of Sales.
5. Contra revenue account.
7. Time of sale; Sales Tax Pa
y
able.
9. a. Debit Accounts Receivable, credit Sales, b. Debit Accounts Receivable from Credit Card
Companies, credit Sales.
11. The credit card company.
ACCOUNTING FOR SALES AND ACCOUNTS RECEIVABLE
CHAPTER 7
Students should recognize that technology is an important factor in the success of a merchant like
indieDenim. As a direct merchant, indieDenim customers shop directly with them — from home or office,
by phone, mail, fax or Web. They ship directly to their customers. Their direct merchant method of doing
business makes shopping simpler, faster and more convenient.
Fast Facts
Note to instructor : These questions are designed to check students’ understanding of the new terms,
concepts, and procedures presented in the chapter.
Discussion Questions
Chapter Opener: Thinking Critically
Managerial Implications: Thinking Critically
A company which fails to maintain up-to-date accounts receivable records may face the following:
Discussion Questions (continued)
13.
15.
EXERCISE 7.1
1. Sales journal 5. General journal
EXERCISE 7.2
Cr.
EXERCISE 7.3
PAGE
1 2013 1
2 May 1 1101 Justin Williams 3 2 4 00 2 4 00 3 0 0 00 2
3 2 1102 Daine Le 2 7 0 00 2 0 00 2 5 0 00 3
4 3 1103 Richard Rodrigues 3 5 1 00 2 6 00 3 2 5 00 4
5 5
expense account.
The bank deposits cash from the sale to the business checking account the same day the sale is
authorized.
A trade discount is a reduction from the list, or suggested retail, price. Different trade discounts are
offered to different customers, based on the size of the order or other factors.
Dr.
SALES JOURNAL
Dr.
Cr.
SALES
CREDIT
CUSTOMER’S
NAME
POST.
REF.
ACCOUNTS
RECEIVABLE
DEBIT
SALES TAX
PAYABLE
CREDITDATE
SALES
SLIP
NO.
18
EXERCISE 7.4
PAGE
POST.
REF.
15GENERAL JOURNAL
DEBIT CREDITDATE DESCRIPTION
1 2013 1
2 June 5 6 0 0 00 2
3 4 8 00 3
Sales Tax Payable
Sales Returns and Allowances
EXERCISE 7.5
1.
2.
The $6,480 debit is posted to Accounts Receivable (111). July 31 is entered in the date column, S1 in
the Post. Ref. column, and $6,480 in the Debit column. The balance is increased by this amount.
The $480 credit is posted to Sales Tax Payable (231). July 31 is entered in the Date column, S1 in the
EXERCISE 7.7
1
List price $2,120.00
$4,200.00
23
$1,550.00
EXERCISE 7.10
ACCOUNT Accounts Receivable ACCOUNT NO.
BALANCE
111
POST.
GENERAL LEDGER
2013
DEBITCREDIT CREDITDEBITDATE DESCRIPTION
POST.
REF.
ACCOUNT Sales Tax Payable ACCOUNT NO.
2013
231
DEBIT CREDIT
BALANCE
DEBITDATE DESCRIPTION
POST.
REF. CREDIT
2013
Sales Returns and Allowances ACCOUNT NO. 451
ACCOUNT
2013
DEBITDATE
BALANCE
DEBIT CREDITCREDITDESCRIPTION
POST.
REF.
NAME Cara Fountain TERMS
POST
n/30
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
DESCRIPTION
POST
.
REF.
2013
BALANCEDATE DEBIT CREDIT
EXERCISE 7.10 (continued)
NAME Sadie Palmer TERMS
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGE
R
n/30
POST.
REF.
2013
CREDITDATE DESCRIPTION
DEBIT BALANCE
PROBLEM 7.1A
Page
SALES
SLIP
NO
CUSTOMER’S
NAME
POST.
REF
SALES
CREDIT
ACCOUNTS
RECEIVABLE
DEBIT
SALES TAX
PAYABLE
CREDIT
DATE
SALES JOURNAL 8
NO
.
NAME
REF
.
1 2013 1
2 July 1 501 Perry Martin 9 7 2 00 7 2 00 9 0 0 00 2
3 6 502 Cindy Han 234900 17400 217500 3
6
23
505
Veronica
7
0
2
00
5
2
00
6
5
0
00
6
CREDIT
DEBIT
CREDIT
DATE
ACCOUNT Accounts Receivable ACCOUNT NO.
PROBLEM 7.1A (continued)
GENERAL LEDGER
111
BALANCE
2013
POST.
REF.DATE DESCRIPTION CREDITDEBIT CREDIT
BALANCE
DEBIT
ACCOUNT Sales Tax Payable ACCOUNT NO.
DATE DESCRIPTION
POST.
REF.
231
DEBIT CREDIT
BALANCE
DEBIT CREDIT
PROBLEM 7.2A
PAGE
SALES ACCOUNTS
SALES JOURNAL
SALES
TAX
8
1 2013 1
2 Feb. 1 1615 4 9 0 3 20 3 6 3 20 4 5 4 0 00 2
3 5 1616 2 2 6 8 00 1 6 8 00 2 1 0 0 00 3
Sun Yoo
Jacqueline Moore
DATE
SLIP
NO.
POST.
REF.
RECEIVABL
E DEBIT
PAYABLE
CREDITCUSTOMER’S NAME
SALES
CREDIT
PROBLEM 7.2A (continued)
ACCOUNT Accounts Receivable ACCOUNT NO.
2013
Feb. 1 Balance ✔1563600
ACCOUNT Sales Tax Payable ACCOUNT NO.
2013
Feb. 1 Balance ✔7 170 00
ACCOUNT Sales ACCOUNT NO.
2013
ACCOUNT Sales Returns and Allowances ACCOUNT NO.
111
DATE
BALANCE
DEBIT CREDITDESCRIPTION
POST.
REF. DEBIT CREDIT
231
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
401
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
GENERAL LEDGER
451
DATE DESCRIPTION
POST.
REF. DEBIT CREDIT
BALANCE
DEBIT CREDIT
PROBLEM 7.2A (continued)
3506500
PROBLEM 7.3A
PAGE 6
1 2013 1
2 Nov. 1 1001 Pauline Judge ✔1620 00 12000 150000 2
3 5 1002 Janet Hutchinson ✔2268 00 16800 210000 3
12 12
Month Ended February 28, 2013
Revenue
Sales
Armik’s Furniture
DATE
SALES
SLIP
NO.
CUSTOMER’S
NAME
POST.
REF.
ACCOUNTS
RECEIVABLE
DEBIT
SALES TAX
PAYABLE
CREDIT
SALES
CREDIT
SALES JOURNAL
Income Statement (Partial)
PROBLEM 7.3A (continued)
PAGE
DATE CREDITDESCRIPTION
16GENERAL JOURNAL
DEBIT
POST.
REF.
1 2013 1
2 Nov. 17 1 5 0 00 2
312003
Accounts Receivable/Lisa Morgan 4
231
111 2
✔
00
451
4 6
Sales Returns and Allowances
Sales Tax Payable
1
PROBLEM 7.3A (continued)
ACCOUNT Sales Tax Payable ACCOUNT NO.
2013
ACCOUNT Sales ACCOUNT NO.
ACCOUNT Sales Returns and Allowances ACCOUNT NO.
2013
NAME Euline Brock TERMS
DESCRIPTION
POST.
REF.
2013
CREDIT
BALANCE
DEBIT
DEBIT
POST.
REF.
CREDIT BALANCE
DATE
CREDIT
DEBIT CREDITDESCRIPTION
DESCRIPTION DEBIT
DATE
GENERAL LEDGER
BALANCE
DEBIT CREDIT
CREDITDESCRIPTION
n/30
BALANCE
DEBIT CREDIT
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
DATE
231
401
451
DATE
POST.
REF. DEBIT
POST.
REF.
PROBLEM 7.3A (continued)
NAME Charles Brown TERMS
DESCRIPTION
POST.
REF.
2013
NAME Janet Hutchinson TERMS
DESCRIPTION
POST.
REF.
2013
NAME Pauline Judge TERMS
DESCRIPTION
POST.
REF.
2013
NAME Lisa Morgan TERMS
DESCRIPTION
POST.
REF.
2013
CREDIT BALANCE
n/30
n/30
n/30
CREDIT
DEBIT
DATE DEBIT
BALANCEDATE DEBIT
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
CREDIT BALANCE
BALANCEDATE DEBIT CREDIT
n/30
DATE
PROBLEM 7.3A (continued)
NAME Henry Okafor TERMS
DESCRIPTION
POST.
REF.
2013
NAME Dorothy Watts TERMS
DESCRIPTION
POST.
REF.
2013
NAME Winnie Wu TERMS
DESCRIPTION
POST.
REF.
2013
DATE DEBIT CREDIT
DEBIT
CREDITDATE DEBIT
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
CREDIT
BALANCE
n/30
n/30
n/30
BALANCE
BALANCE
DATE
PROBLEM 7.3A (continued)
Euline Brock 410400
Charles Brown 7 5 6 00
Janet Hutchinson 226800
PROBLEM 7.4A
PAGE
INVOICE
NO.
POST.
REF.
1 2013 1
2 Jan. 3 1081 ✔500 00 2
3 8 1082 ✔775 00 3
8 25 1087 ✔427 00 8
9 27 1088 ✔925 00 9
10 31 4779 00 10
11 (1 1 1/ 4 01) 11
12 12
Moore’s Flower Shop
ACCOUNTS
RECEIVABLE
DR./ SALES CR.CUSTOMER’S NAME
7
Carter Garden Supply
Thomas Florist
Total
SALES JOURNAL
The Dining Elegance China Shop
Schedule of Accounts Receivable
November 30, 2013
Thomas Florist
DATE
PROBLEM 7.4A (continued)
PAGE
1 2013 1
DEBIT
POST.
REF.DESCRIPTION
GENERAL JOURNAL 11
CREDITDATE
1
2013
1
2 Jan. 15 5 0 00 2
3
3 00
✔
Sales Returns and Allowances
Accounts Receivable/Thomasville Flower Shop 05
451
111
12
12
on
PROBLEM 7.4A (continued)
ACCOUNT ACCOUNT NO.
GENERAL LEDGER
Sales Returns and Allowances 451
2013
DEBIT DEBIT
BALANCE
CREDITDATE DESCRIPTION
POST.
REF. CREDIT
NAME Applegate Nursery TERMS
POST
n/45
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
DESCRIPTION
POST
.
REF.
2013
CREDITDATE DEBIT BALANCE
Carter Garden Supply TERMS
DESCRIPTION
POST.
REF.
2013
NAME
DATE BALANCECREDITDEBIT
n/45
NAME Cedar Hill Floral Shop TERMS
POST.
REF
n/45
DESCRIPTION REF.
2013
DATE DEBIT CREDIT BALANCE
PROBLEM 7.4A (continued)
NAME Moore’s Flower Shop TERMS n/45
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
DESCRIPTION
POST.
REF.
2013
BALANCEDATE DEBIT CREDIT
NAME Thomas Florist TERMS
DESCRIPTION
POST.
REF.
2013
BALANCE
n/45
DATE DEBIT CREDIT
2013
Thomasville Flower Shop TERMS
DESCRIPTION
POST.
REF.
2013
DATE
NAME n/45
BALANCEDEBIT CREDIT
PROBLEM 7.4A (continued)
Applegate Nursery 6 8 0 00
Carter Garden Supply 7 7 5 00
Cedar Hill Floral Shop 4 8 0 00
PROBLEM 7.1B
PAGE
1 2013 1
2 June 1 201 Fatima Fakih 113400 8400 105000 2
3 6 202 Gilbert Gomez 9 9 9 00 7 4 00 9 2 5 00 3
Special Occasions Flower Shop
Schedule of Accounts Receivable
January 31, 2013
DATE
SALES
SLIP
NO.
8
CUSTOMER’S
NAME
POST.
REF.
SALES
CREDIT
SALES TAX
PAYABLE
CREDIT
ACCOUNTS
RECEIVABL
E DEBIT
SALES JOURNAL