Q1. Complete the following table for Sales, Sales Returns & Allowances, Sales Discounts, Inventory, and Cost of Goods Sold.

Background

Topic: Recording Sales Transactions

This question tests your understanding of how to record various sales-related transactions in accounting, including sales, returns, discounts, inventory changes, and cost of goods sold (COGS).

Key Terms and Formulas:

• Sales: Revenue earned from selling goods.

• Sales Returns & Allowances: Reductions in sales due to returned goods or allowances granted.

• Sales Discounts: Reductions in sales price for early payment or other reasons.

• Inventory: Goods available for sale; decreases when goods are sold.

• Cost of Goods Sold (COGS): The cost to the company of the goods sold.

Step-by-Step Guidance

1. Identify the type of transaction (sale, return, discount, etc.) and the accounts affected.

2. For a sale, record the revenue and the reduction in inventory, as well as the COGS.

3. For sales returns and allowances, reduce sales revenue and adjust inventory and COGS if goods are returned.

4. For sales discounts, reduce sales revenue by the discount amount.

5. Use the following journal entry formats for each transaction:

   • Sale:

   • COGS:

   • Sales Returns:

   • Sales Discounts:

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Q2. Calculate net sales given Gross Sales, Sales Returns & Allowances, and Sales Discounts.

Background

Topic: Net Sales Calculation

This question tests your ability to calculate net sales, which is the actual revenue earned after accounting for returns and discounts.

Key Terms and Formula:

• Gross Sales: Total sales before deductions.

• Sales Returns & Allowances: Deductions for returned goods or allowances.

• Sales Discounts: Deductions for early payment or other discounts.

Formula:

Step-by-Step Guidance

1. Identify the values for Gross Sales, Sales Returns & Allowances, and Sales Discounts.

2. Subtract Sales Returns & Allowances from Gross Sales.

3. Subtract Sales Discounts from the result in step 2.

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Q3. Match sales transactions to the appropriate journal and ledger actions.

Background

Topic: Sales Journals and Ledger Posting

This question tests your understanding of which accounting journals and ledgers are used for different types of sales transactions.

Key Terms:

• Sales Journal: Used for recording credit sales.

• Cash Receipts Journal: Used for recording cash sales and receipts.

• General Journal: Used for transactions not fitting other journals, such as returns.

• Subsidiary Ledger: Detailed record for individual customer accounts.

• General Ledger: Main record of all accounts.

Step-by-Step Guidance

1. For each transaction, determine if it is a cash sale, credit sale, or a return.

2. Cash sales are recorded in the Cash Receipts Journal.

3. Credit sales are recorded in the Sales Journal and posted to the subsidiary ledger.

4. Returns and allowances are typically recorded in the General Journal.

5. At the end of the month, totals from the Sales Journal are posted to the General Ledger.

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Q4. Enter invoices into a sales journal and total the entries, using account numbers for each column.

Background

Topic: Sales Journal Entries and Posting

This question tests your ability to record sales transactions in the sales journal, including the use of account numbers and calculation of totals.

Key Terms and Format:

• Accounts Receivable (#120): Amount owed by customers.

• Sales (#400): Revenue from sales.

• Inventory (#115): Goods available for sale.

• Cost of Goods Sold (#502): Cost of inventory sold.

• Sales Terms 2/10, n/30: 2% discount if paid within 10 days, net due in 30 days.

Step-by-Step Guidance

1. For each invoice, record the date, customer, invoice number, sales amount, and cost of inventory.

2. Enter the sales amount in the Sales column (#400) and the Accounts Receivable column (#120).

3. Enter the cost of inventory in the COGS column (#502) and reduce Inventory (#115) by the same amount.

4. Repeat for each transaction, then total each column at the end of the period.

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Q5. Use the sales journal and related ledger accounts to answer questions about Art’s Clothing Co.

Background

Topic: Sales Journal Analysis and Ledger Balances

This question tests your ability to analyze sales journal entries and related ledgers to determine inventory sold, sales revenue, accounts receivable, and amounts owed by customers.

Key Terms:

• Sales Journal: Record of credit sales.

• Cost of Goods Sold: Total cost of inventory sold.

• Accounts Receivable Subsidiary Ledger: Tracks amounts owed by individual customers.

• Accounts Receivable Control Account: Total amount owed by all customers.

Step-by-Step Guidance

1. Locate the "Cost of Goods Sold Dr., Inventory Cr." column in the sales journal to find total inventory sold.

2. Find the total posted to the Sales Revenue account from the sales journal.

3. Check the Accounts Receivable Subsidiary Ledger for the amount owed by Hal’s Clothing Company.

4. Identify the Accounts Receivable Control Account for the total amount hoped to be collected from all customers.

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Q6. Indicate the journal in which you would record transactions A through F (SJ, CRJ, GJ).

Background

Topic: Journal Selection for Transactions

This question tests your knowledge of which accounting journal is appropriate for different types of transactions.

Key Terms:

• SJ (Sales Journal): Credit sales of inventory.

• CRJ (Cash Receipts Journal): Cash sales and collections.

• GJ (General Journal): Returns, depreciation, interest, and other non-standard transactions.

Step-by-Step Guidance

1. For each transaction, determine if it involves cash, credit, or is a non-sales event.

2. Assign the correct journal based on the nature of the transaction.

3. Remember: cash sales and collections go to CRJ, credit sales to SJ, and returns/depreciation/interest to GJ.

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Q7. Journalize and post sales and returns transactions for Food on the Go in June.

Background

Topic: Journalizing Sales and Returns; Accounts Receivable Subledger

This question tests your ability to record sales and returns in the appropriate journals, post to the accounts receivable subledger, and prepare a schedule of accounts receivable.

Key Terms and Format:

• Sales Journal: Used for credit sales.

• General Journal: Used for returns and allowances.

• Accounts Receivable Subledger: Tracks amounts owed by each customer.

• Schedule of Accounts Receivable: List of all customer balances.

Step-by-Step Guidance

1. For each sale, record the transaction in the sales journal, noting the date, customer, invoice number, sales amount, and cost of inventory.

2. For returns, record the transaction in the general journal, noting the credit memo, customer, amount, and cost of inventory returned.

3. Post each transaction to the accounts receivable subledger for the appropriate customer.

4. Prepare a schedule of accounts receivable by listing each customer and their balance after all transactions.

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