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LESSON 9-1

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LESSON 9-1

Journalizing Purchases Using a Purchases Journal

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Corporation

  • Corporation – An organization with the legal rights of a person and which many person may own
  • Share of stock – Each unit of ownership in a corporation
  • Capital stock – Total share of ownership in a corporation
  • Stockholder - An owner of one or more share of a corporations

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LESSON 9-1

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Merchandise

  • Merchandise- Goods that a business purchases to sell
  • Merchandising Business – a business that purchases and sells goods
  • Retail Merchandising Business – A merchandising business that sells to those who use or consume the goods
  • Wholesale merchandising business – A business that buys and resells merchandise to retail merchandising business

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LESSON 9-1

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Special journals

  • Special journal – a journal used to record only one kind of transaction
    • Purchase journal
    • Cash payments journal
    • Sales journal
    • Cash receipts journal
    • General journal

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LESSON 9-1

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Purchasing Merchandise

  • Cost of merchandise – The price a business pays for goods it purchases to sell
  • Markup – The amount added to the cost of merchandise to establish the selling price
  • Vendor – a business from which merchandise is purchased or supplies or other assets are bought

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LESSON 9-1

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Purchase on account

  • Purchase on account – A transaction in which the merchandise is to be paid for later
  • Accounting Concept –
    • Historical Cost - is applies when the actual amount paid for merchandise or other items bought is recorded

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LESSON 9-1

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PURCHASING MERCHANDISE ON ACCOUNT

LESSON 9-1

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LESSON 9-1

page 236

Category – Cost of Merchandise

Category – Liabilities

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PURCHASE INVOICE

LESSON 9-1

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1. Stamp the date received and�purchase invoice number.

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page 238

4. Review the vendor’s terms.

3. Initials of the person who�checked the invoice.

2. Place a check mark by each amount.

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Purchase Invoice

LESSON 9-1

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LESSON 9-1

Purchase invoice – An invoice used as a source document for recording a purchase on account transaction

Terms of sale – An agreement between a buyer and a seller about payment for merchandise

Example due in 30 days

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PURCHASES JOURNAL

LESSON 9-1

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LESSON 9-1

page 237

Purchases journal – a special journal used to record only purchases of merchandise on account

Special Amount Column – A journal amount column headed with an account title

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PURCHASING MERCHANDISE ON ACCOUNT

LESSON 9-1

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page 239

November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83.

1. Write the date.

2. Write the vendor name.

3. Write the purchase invoice number.

4. Write the amount of the invoice.

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TOTALING AND RULING A PURCHASES JOURNAL

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page 240

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1. Rule a single line across the amount column.

2. Write the date.

3. Write the word Total.

4. Add the amount column.

5. Write the total.

6. Rule double lines across the amount column.

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TERMS REVIEW

  • merchandise
  • merchandising business
  • retail merchandising business
  • wholesale merchandising business
  • corporation
  • share of stock
  • capital stock
  • stockholder
  • special journal
  • cost of merchandise
  • markup
  • vendor
  • purchase on account
  • purchases journal
  • special amount column
  • purchase invoice
  • terms of sale

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LESSON 9-1

page 241

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LESSON 9-1

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LESSON 9-2

Journalizing Cash Payments Using a Cash Payments Journal

LESSON 9-1

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CASH PAYMENTS JOURNAL

LESSON 9-2

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LESSON 9-2

page 242

Cash Payment Journal – A special journal used to record only cash payment transactions.

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CASH PAYMENTS JOURNAL

LESSON 9-2

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LESSON 9-2

page 242

Cash Discount – A deduction that a vendor allows on the invoice amount to encourage prompt payment

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Purchases Discount – A cash discount on purchases taken by a customer.

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CASH PAYMENTS JOURNAL

LESSON 9-2

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page 242

General Amount Column – A journal amount column that is not headed with an account title.

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A source document for most cash payments is the check issued.

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CASH PAYMENT OF AN EXPENSE

LESSON 9-2

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LESSON 9-2

page 243

November 2. Paid cash for advertising, $150.00. Check No. 292.

1. Write the date.

2. Write the account title.

3. Write the check number.

4. Write the debit amount.

5. Write the credit amount.

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LESSON 9-1

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LESSON 9-1

Supplies are not recorded in the purchases account because the are not intended for resale

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Merchandise is for resale. It is a purchase.

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BUYING SUPPLIES FOR CASH

LESSON 9-2

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LESSON 9-2

page 243

November 5. Paid cash for office supplies, $94.00. Check No. 293.

1. Write the date.

2. Write the account title.

3. Write the check number.

4. Write the debit amount.

5. Write the credit amount.

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CASH PAYMENTS FOR PURCHASES

LESSON 9-2

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LESSON 9-2

page 244

November 7. Purchased merchandise for cash, $600.00. Check No. 301.

1. Write the date.

2. Write the account title.

3. Write the check number.

4. Write the debit amount.

5. Write the credit amount.

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LESSON 9-1

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LESSON 9-1

List Price – The retail price listed in a catalog or on an Internet site

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Trade Discount – A reduction in the list price granted to customers

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LESSON 9-1

A cash discount is stated as a percentage deducted from the invoice amount. For example, 2/10. n/30 is common term of sale, which is read two ten, net thirty. What does this mean????

2% discount may be deducted if paid in 10 days. All due in 30 days.

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LESSON 9-1

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LESSON 9-1

Contra Accounts – An Account that reduces a related account on a financial statement

Example- Purchases Discount is a contra account to Purchases.

Since Contra accounts are deductions from their related accounts, contra account normal balances are opposite the normal balances of their related accounts.

Example – Normal balance for purchases is a debit so the normal balance for Purchases Discount is a credit

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LESSON 9-1

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LESSON 9-1

Cost of Merchandise

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LESSON 9-1

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November 8. Paid cash on account to Gulf Craft Supply, $488.04, covering Purchase Invoice No. 82 for $498.00, less 2% discount, $9.96. Check No. 302.

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CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS

LESSON 9-2

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LESSON 9-2

page 245

November 8. Paid cash on account to Gulf Craft Supply, $488.04, covering Purchase Invoice No. 82 for $498.00, less 2% discount, $9.96. Check No. 302.

1. Write the date.

2. Write the account title of the vendor.

3. Write the check number.

4. Write the debit amount.

5. Write the credit amount.

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6. Write the credit amount.

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CASH PAYMENTS ON ACCOUNT WITHOUT PURCHASES DISCOUNTS

LESSON 9-2

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LESSON 9-2

page 246

November 13. Paid cash on account to American Paint, $2,650.00, covering Purchase Invoice No. 77. Check No. 303.

1. Write the date.

2. Write the vendor account title.

3. Write the check number.

4. Write the debit amount.

5. Write the credit amount.

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TERMS REVIEW

  • cash payments journal
  • cash discount
  • purchases discount
  • general amount column
  • list price
  • trade discount
  • contra account

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page 247

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LESSON 9-1

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LESSON 9-3

Performing Additional Cash Payments Journal Operations

LESSON 9-1

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PETTY CASH REPORT

LESSON 9-3

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LESSON 9-3

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page 248

6. Write the actual amount of cash on hand.

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1. Write the date and custodian name.

2. Write the fund total.

3. Summarize petty cash payments.

4. Calculate and write the total payments.

5. Calculate and write the recorded amount on hand.

7. Subtract the actual amount on hand from the recorded amount on hand and write the amount.

8. Write the total of the replenish amount.

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LESSON 9-1

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LESSON 9-1

Cash Short – A petty cash on hand amount that is less than a recorded amount

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Cash Over – A petty cash on hand amount that is more than a recorded amount

The balance of Cash Short and Over can be either a debit or credit.

The balance is usually a debit because the petty cash fund is more likely to be short than over.

Cash Short and Over – is the account title. It is a temporary account and is closed at the end of the period to Income Summary.

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REPLENISHING A PETTY CASH FUND

LESSON 9-3

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LESSON 9-3

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6

page 249

1. Date

2. Account titles

3. Check number

4. Expense amounts

5. Cash short as a debit; cash over as a credit

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6. Total cash payment

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TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL PAGE TO CARRY TOTALS FORWARD

LESSON 9-3

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LESSON 9-3

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page 250

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1. Rule a single line.

2. Write the date.

3. Write the words Carried Forward in the Account Title column.

4. Place a check mark in the Post. Ref. column.

5. Write each column total.

6. Rule double lines.

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STARTING A NEW CASH PAYMENTS JOURNAL PAGE

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page 251

1. Write the journal page number.

2. Write the date.

3. Write the words Brought Forward in the Account Title column.

4. Place a check mark in the Post. Ref. column.

5. Record the column totals.

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TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL AT THE END OF A MONTH

LESSON 9-3

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LESSON 9-3

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page 252

1. Rule a single line.

2. Write the date.

3. Write the word Totals in the Account Title column.

4. Write each column total.

5. Rule double lines.

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5

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TERMS REVIEW

  • cash short
  • cash over

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LESSON 9-1

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LESSON 9-1

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LESSON 9-4

Journalizing Other Transactions Using a General Journal

LESSON 9-1

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MEMORANDUM FOR BUYING SUPPLIES ON ACCOUNT

LESSON 9-4

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LESSON 9-4

page 254

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BUYING SUPPLIES ON ACCOUNT

LESSON 9-4

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6

page 255

November 6. Bought store supplies on account from Gulf Craft Supply, $210.00. Memorandum No. 52.

1. Write the date.

5. Write the account title and vendor name.

2. Write the account title.

6. Place a diagonal line in the Post. Ref. column.

3. Write the memorandum number.

7. Write the credit amount.

4. Write the debit amount.

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LESSON 9-1

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LESSON 9-1

Purchases Return – Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer’s accounts payable

Purchases Allowance – Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer’s accounts payable.

Purchases Returns and Allowances – Account title – Contra Account to Purchases, there fore the normal balance is a credit

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DEBIT MEMORANDUM FOR PURCHASES RETURNS AND ALLOWANCES

LESSON 9-4

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page 256

Debit Memorandum – a form prepared by the customer showing the price deduction taken by the customer for returns and allowances

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JOURNALIZING PURCHASES RETURNS AND ALLOWANCES

LESSON 9-4

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LESSON 9-4

4. Write debit memorandum number.

November 28. Returned merchandise to Crown Distributing, $252.00, covering Purchase Invoice No. 80. Debit Memorandum No. 78.

page 257

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6

1. Write the date.

5. Write the amount.

2. Write the account title and vendor name.

6. Write Purchases Returns and Allow.

3. Place a diagonal line in the Post. Ref. column.

7. Write the amount.

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TERMS REVIEW

  • purchases return
  • purchases allowance
  • debit memorandum

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LESSON 9-4

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LESSON 9-1

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LESSON 9-1

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