Assignment
Part 1 (9 points):
Answer the following questions:
- What is a cash receipt? How do businesses record the receipt of cash; what account is debited when cash is received?
- Define Revenue Recognition Principle (see Pg 11). Since cash is not received in a Sale on Account, what account would be debited instead of Cash?
- When a charge customer pays on their account, the debit, of course, is to Cash in Bank and the credit is to Accounts Receivable. Why is this credit made to Accounts Receivable and not to the Sales account?
Part 2 (6 points):
A sales slip shows that $1,500 in merchandise has been sold and the sales tax rate is 4%. Calculate the amount of sales tax and list the total amount due by the customer.
Part 3 (6 points):
Define the following terms:
- Controlling Account
- Cash Discount
- Credit Terms
Part 4 (6 points):
Evaluate the practice of using a contra account to record sales returns and allowances. In your answer, define contra account and explain how a contra account differs from its related account—does it have the same balance side or opposite balance side from its related account.
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