Chapter 14 - Accounting for Sales and Cash Receipts

What is the controlling account for a company's customers?

• Subsidiary ledger

• General Ledger

• Accounts Receivable

• Markup Ledger

Regardless of when payment is received, the revenue should be recorded when a sale is made, not on the date cash is received.

• True
• False

The amount of sales tax collected is an expense of operating a business.

• True
• False

Credit card and debit card sales are treated as cash sales because receives its cash in a very short time.

• True
• False

Sales Tax Payable has a normal debit balance.

• True
• False

Maintaining a separate account for sales discounts provides business managers with information to evaluate whether a sales discount is a cost-effective method.

• True
• False

When a sales discount is taken, a customer pays less cash than the invoice amount previously recorded in the sales account.

• True
• False

Down the River Canoe sold merchandise for cash to Low Rent Tours for $150, plus sales tax of $11. The journal entry for Down the River Canoe to record this transaction is:

• debit Cash, $161; credit Sales, $150, Sales Tax Payable, $11.
• debit Cash, $161; credit Accounts Receivable/Low Rent Tours, $161.
• debit Accounts Receivable/Low Rent Tours, $161; credit Cash, $161.
• debit Sales, $150, Sales Tax Payable, $11; credit Cash, $161.

Quick Supply sold office supplies for cash to Jet Set Travel for $45, plus sales tax of $3. The journal entry for Quick Supply to record this transaction is:

• debit Sales, $45, Sales Tax Payable, $3; credit Accounts Receivable/Jet Set Travel, $48.
• debit Accounts Receivable/Jet Set Travel, $48; credit Sales $45, Sales Tax Payable, $3.
• debit Accounts Receivable/Jet Set Travel, $48; credit Cash, $48.
• debit Cash, $48; credit Sales, $45, Sales Tax Payable, $3.

Tricky Ricky's Appliances sold merchandise on account to Smith Builders for $880, plus sales tax of $40. The journal entry for Tricky Ricky's Appliances to record this transaction is:

• debit Accounts Payable/Smith Builders, $920; credit Sales, $880, Sales Tax Payable, $40.
• debit Accounts Receivable/Smith Builders, $920; credit Sales, $880, Sales Tax Payable, $40.
• debit Sales, $880, Sales Tax Payable, $40; credit Accounts Payable/Smith Builders, $920.
• debit Sales, $880, Sales Tax Payable, $40; credit Accounts Receivable/Smith Builders, $920.