SALES AND CASH RECEIPTS TRANSACTIONS Paul Jackson owns a retail business. The following sales, returns, and cash receipts are for April 20--. There is a 7% sales tax. REQUIRED 1. Record the transactions starring on page 7 of a general journal. 2. Post from the journal to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.

Journalize the transactions related to sales and cash receipt transactions.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

• Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
• Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Journalize the transactions related to sales and cash receipt transactions.

 Transaction on April 1:

Table (1)

Description:

• Accounts Receivable, OLM is an asset account. Since sales is made on account, the receivables increased, and an increase in asset is debited.
• Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
• Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 1:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $2,100×7%= $147

Working Note 2:

Compute accounts receivable amount (Refer to Working Note 1 for value of sales tax payable).

Accounts receivable, OLM = Sales+Sales tax payable= $2,100+$147= $2,247

Transaction on April 3:

Table (2)

Description:

• Accounts Receivable, AP is an asset account. Since sales is made on account, the receivables increased, and an increase in asset is debited.
• Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
• Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 3:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $1,000×7%= $70

Working Note 4:

Compute accounts receivable amount (Refer to Working Note 3 for value of sales tax payable).

Accounts receivable, AP = Sales+Sales tax payable= $1,000+$70= $1,070

Transaction on April 6:

Table (3)

Description:

• Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
• Sales Tax Payable is a liability account. Since the payable decreased due to returns, the liability decreased, and a decrease in liability is debited.
• Accounts Receivable, OLM is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Working Note 5:

Compute sales tax payable amount.

Sales tax payable = Sales returns×Sales tax percentage= $50×7%= $3.50

Working Note 6:

Compute accounts receivable amount (Refer to Working Note 5 for value of sales tax payable).

Accounts receivable, OLM = Sales returns+Sales tax payable= $50.00+$3.50= $53.50

Transaction on April 7:

Table (4)

Description:

• Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
• Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
• Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 7:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $3,240×7%= $226.80

Working Note 8:

Compute cash amount (Refer to Working Note 7 for value of sales tax payable).

Cash = Sales+Sales tax payable= $3,240.00+$226.80= $3,466.80

Transaction on April 9:

Table (5)

Description:

• Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
• Accounts Receivable, OLM is an asset account. Since amount to be received has decreased, asset account decreased, and a decrease in asset is credited.

Working Note 9:

Compute accounts receivable value (Refer to Working Notes 2 and 6 for both the values).

Accounts receivable, OLM  = (Accounts receivable debit value–Accounts receivable credit value)= $2,247.00–$53.50= $2,193.50

Transaction on April 12:

Table (6)

Description:

• Accounts Receivable, MR is an asset account. Since sales is made on account, the receivables increased, and an increase in asset is debited.
• Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
• Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 10:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $980×7%= $68.60

Working Note 11:

Compute accounts receivable amount (Refer to Working Note 10 for value of sales tax payable).

Accounts receivable, MR = Sales+Sales tax payable= $980.00+$68.60= $1,048.60

Transaction on April 14:

Table (7)

Description:

• Cash is an asset account. Since cash is received, asset account increased, and an increase in asset is debited.
• Sales is a revenue account. Since revenues and gains increase equity, equity value is increased, and an increase in equity is credited.
• Sales Tax Payable is a liability account. Since the payable increased, the liability increased, and an increase in liability is credited.

Working Note 12:

Compute sales tax payable amount.

Sales tax payable = Sales×Sales tax percentage= $2,180×7%= $152

Post the journalized entries into the accounts of the general ledger, and the customer accounts in accounts receivable ledger.