Lesson 8: During this class we will take up the problem 13-5 which we completed last day.
Objectives:
Once we have taken up last day's problem, we will then explore Topic #3 of Chapter 13 - journalizing and posting cash transactions.
The primary focus of this topic is the Cash Receipts Journal (page 555) and the Cash Payments Journal (pages 559) which we use to record cash receipts and payments, along with their associated entries to the GST payable account.
In addition, we will note how Sales Discounts and Purchase Discounts are accounted for within the entries to these special journals.
| Cash Receipts Journal | ||||||||
Date | Account Credited | Explanation | P. R. | General | Accounts | GST | Sales | Net |
| May 1 | Cash Balance... | $6,700.00 | ||||||
| May 7 | Sales | Cash sales for week.. | 401 | 490.00 | 34.30 | 524.30 | ||
| May 9 | Brown's Florists | For Invoice #234 |  | 107.00 | 2.00 | 105.00 | ||
| May 15 | A. Smith, Capital | Additional investment | 301 | 1,000.00 | 1,000.00 | |||
| May 31 | 1,490.00 | 107.00 | 34.30 | 2.00 | 1,629.30 | |||
The Cash Receipts Journal is used only to record cash sales or the payments received on our accounts receivable. Credit sales are recorded within the Sales Journal.
At the end of the month, we will subtract our total Input Tax Credits from the total GST which we charged (not collected from) our customers. Therefore, the balance of our GST Payable account will indicate the amount of GST which we must remit to the government.
Points to Remember: 1) GST is only recorded on cash sales. We will not record GST if a customer is remitting a payment on a previous credit purchase, becasue the GST was already accounted for within the Sales Journal back when we initially made the sale.
2) Calculate the "Sales Discount" ONLY on the "Sale" amount! Do NOT calculate a discount on the TOTAL account receivable, as this would involve providing a discount on the GST as well as the actual sale. The government does not allow businesses to offer discounts on tax! As an example, if we sold an item for $100.00, plus GST of $7.00, we would charge a total of $107.00. A discount of 2/10, n/30 would mean that our customer could save $2.00 (2% of $100.00) if they were to pay the total bill within 10 days. It does not mean that we would calculate a discount on the total account receivable (ie. 2% of $107.00).
| Cash Payments Journal | |||||||||
Date | Account Debited | Explanation | Chq. | P. R. | General | Accounts | GST | Purchases | Net |
| May 1 | Mortgage Payable | May mortgage | 719 | 250 | 1,400.00 | 1,400.00 | |||
| May 8 | MacFarlane Ltd. | On Invoice #SI1295 | 720 | | 1,070.00 | 20.00 | 1,050.00 | ||
| May 14 | Advertising Expense | Globe & Mail | 721 | 510 | 175.00 | 12.25 | 187.25 | ||
| May 22 | Flora Co. | On Invoice #95-LK17 | 722 | | 2,140.00 | 40.00 | 2,100.00 | ||
| May 31 | 1,575.00 | 3,210.00 | 12.25 | 60.00 | 4,737.25 | ||||
The Cash Payments Journal is used only to record cash purchases or the payments we make on our accounts payable. Credit purchases are recorded within the Purchases Journal.
Points to Remember: 1) GST is only recorded on cash purchases. We will not record GST if we are remitting payment on a previous credit purchase, becasue the GST was already accounted for within the Purchases Journal back when we initially made the purchase.
2) Calculate the "Purchases Discount" ONLY on the "Purchases" amount! Do NOT calculate a discount on the TOTAL account payable, as this would involve providing a discount on the GST as well as the actual purchase. The government does not allow businesses to offer discounts on tax! As an example, if we purchased an item for $100.00, plus GST of $7.00, we would owe a total of $107.00. A discount of 2/10, n/30 would mean that we could save $2.00 (2% of $100.00) if we were to pay the total bill within 10 days. It does not mean that we would take a discount on the total amount owing (ie. 2% of $107.00).
Method of Instruction and Evaluation:
After a socratic lecture on the above topics, students will complete Challenge Problem 13-9 on page 563.
Reference:
Please read this topic (pages 552 - 561) in preparation for the class.