Introduction

This is the final chapter discussion of the special-purpose journals used by merchandising companies. To increase the volume of sales transactions, businesses allow credit sales, but sales for cash are always a preference. Companies can choose to sell only to cash customers, but doing so will limit their sales volume and affect their growth in the industry. As a general rule, the ratio of a high inventory turnover will yield a greater profit for the business. Though cash sales transactions set their own boundaries, credit sales also have their disadvantages. As indicated in Chapter 8, losses on uncollectible accounts are always incurred no matter how tough the credit and collection policies are. Careful record keeping of customers’ accounts must be maintained as a check and balance to the Accounts Receivable general ledger. Collections of the Accounts Receivable must be properly accounted for to safeguard company assets and minimize unexpected costs.