Recording Sales of Merchandise on Account – Example 2
Some American organizations have a tax exemption status. When you make a sale to such an organization, the sales tax should not be included. The following example illustrates the steps necessary to record this type of transaction:
On January 7, Olympic Sports Wear sold merchandise on account to Nathan Ashley High School Athletics for $3,000.
Step 1: The source document for this sales transaction is sales slip 11.
Step 2: Enter the date from the sales slip in the Date column.
Step 3: Enter the sales slip number in the Sales Slip Number column.
Step 4: Enter the customer name in the Customer’s Account Debited column.
Step 5: Enter the total amount of merchandise sold in the Sales Credit column.
Step 6: Enter the total amount to be received from the customer in the Accounts Receivable Debit column.
The transaction in this example is analyzed in the same way as Example 1. However, unlike the earlier case, the sales tax is not recorded.
Remember, if a sale is made to a tax exempted organization, the amount entered in the sales credit column and the amount entered in the accounts receivable debit column are the same.