Chapter 11

Vocabulary

1. Customer - a person or business to whom merchandise or services are sold.
2. Sales Tax - a tax on a sale of merchandise or services.
3. Cash Sale - a sale in which cash is received for the total amount of the sale at the time of the transaction.
4. Credit Card Sale - a sale in which a credit card is used for the total amount of the sale at the time of the transaction.

Important Facts

• Sales tax rates are usually stated as a percentage of sales.
• Every business collecting a sales tax needs accurate records of the amount of total sales and total sales tax collected.
• The amount of sales tax collected is a business liability until paid to the state government. It is recorded in a separate liability account titled "Sales Tax Payable".
• To calculate Sales Tax: Price of Goods X Sales Tax Rate = Sales Tax
• A credit card slip is prepared for each credit card sale. At the end of the week, they are included with the business's bank deposit.
• When a credit card transaction is entered on the cash register, a paper tape is printed as a receipt for the customer.
• At the end of the week, a cash register tape is printed showing total cash and credit card sales. It is then used as the source document for weekly cash and credit card sales transactions.
• Invoice - a form describing the goods or services sold, the quantity, and the price. It is prepared by the seller when merchandise is sold on account.
• Sales Invoice - (also called sales ticket or sales slip) an invoice used as a source document for recording a sale.
• Three copies of the invoice are prepared. One goes to the customer, one to the shipping department, and one is kept by the business as a source document.