Chapter 10Journalizing Purchases and Cash Payments

Using Special Journals

Partnerships

• Partnership: a business in which two or more persons combine their assets and skills

• Partner: each member of a partnership. They agree how much each will share in profits or loss

10.1-Journalizing Purchases Using a Purchases Journal

• The Business- Omni Import p.219:

• Michelle Wu and Karl Koehn

• Merchandising Business: a business that purchases and sells goods

• Retail Merchandising Business: sells merchandise (product) to those who use or consume this product

10.1 cont

• Wholesale merchandising business: buys and sells merchandise to retail merchandising businesses (resell)

Using Special Journals

• A journal used to record only one kind of transaction

Omni’s Journals

• Omni has five journals:

• Purchases- for all purchases of merchandise on account

• Cash Payments- for all cash payments

• Sales- for all sales of merchandise on account

• Cash receipts- for all cash receipts

• General- for all other transactions

Purchasing Merchandise• Cost of merchandise- the price a

business pays for goods it purchases to sell

• Selling price must be greater than cost in order to make a profit

• Markup- the amount added to the cost of merchandise to establish the selling price

• Vendor- a business from which merchandise is purchases or supplies or other assets are bought

Purchases on Account• Purchases- a cost account- is used

only for merchandise purchased

• Purchase on account- purchase merchandise to be paid for at a later date

• An Accounts Payable account is used to summarize amounts owed to vendors- normal credit balance

Purchases Journal

• Used only to record purchases of merchandise on account

• only on one line

• Special Amount Column- used for frequently occurring transactions

• Saves time- debit Purchases, credit Accounts Payable

Purchase Invoice• Form describing the goods sold,

the quantity, and the price. Is used as a source document for a purchase sold on account

• stamped with the date received and the purchase invoice number

• check each item was received

• initial of person who checks

• review terms of sale

Purchasing Merchandise on Account

• November 2. Purchased merchandise on Account from Crown LTD, $2,039.00. Purchase Invoice No. 83

• To Journalize:

• Write the date

• Write the Vendor name (Crown LTD)

• Write the Purchase Number

• Write amount in the special amount column: this amount is a debit to Purchases and a credit to Accts Payable

Totaling and Ruling a Purchases Journal

• Omni rules purchases journal at the end of each month

• Rule a single line across the amount column under last entry

• Write the date, Total, add the column

• Write the total under single rule line and rule a double line under

10.1 Review- p.228

• Terms Review

• Audit Your Understanding #1-4

• Work Together #5-6

• On Your Own #7-8

10.2 Journalizing Cash Payments Using a Cash Payment Journal

• Cash Payments Journals- a special journal used to record only cash payment transactions

• All cash payment transactions affect Cash account

• some may affect Accounts Payable

• General amount, AP Debit, Cash Credit-special columns

• S.D- check or memorandum

Purchasing Merchandise for Cash

• November 1. Purchased merchandise for cash, $575.00 Check No. 290

• Date, Purchases (account title)

• no special column because Purchases a infrequently made with cash

• Check #, Debit-General Debit, Credit- Cash

Buying Supplies for Cash

• November 5. Paid cash for office supplies, $34.00. Check No. 292.

• Not recorded in Purchases Account

• Record in Cash Payments Journal the same as purchasing merchandise for cash

Cash Payment on Account

• November 7. Paid cash on account to Pacific Imports, $1,050.00, covering Purchase Invoice No. 81. Check No. 294.

• Date, Vendor Name (Pacific Imports), Check #

• Debit- A/P Debit Column

• Credit- Cash Credit Column

Cash Paymnet of An Expense

• November 9. Paid Cash for advertising. $150.00. Check No. 296

• Date, Account Title- Advertising Expense, Check #

• Debit- General Debit

• Credit- Cash Credit

10.2 Review- p. 233

• Terms Review

• Audit Your Understanding #1-3

• Work Together #4

• On Your Own # 5

10.3 Performing Additional Cash Payments Journal Operations

• Replenish Petty Cash:

• November 9. Paid cash to replenish petty cash fund, $205.00: office supplies, $35.00; store supplies, $47.00; advertising, $92.00; miscellaneous, $31.00. Check No. 297

• Date, List account titles affected on separate lines, Check #

• Debit- in General Debit; Credit- Total in first line of entry in Cash Credit

Cash Withdrawals by Partners

• Two Drawing Accounts are used- one for each partner

• November 10. Michelle Wu, partner, withdrew cash for personal use, $1,200.00. Check No. 298

• Cash Payments Journal-Date, Account Title, Check #

• General Debit-$1200; Cash Credit $1200

Total and Proving

• Total and Prove whenever a journal page is full and at the end of each month

• Instead of writing TOTAL in account column, write CARRIED FORWARD

• Put a check mark in Post Ref- nothing needs to be posted

Starting a New Page

• Write BROUGHT FORWARD and the balances from the previous Journal Page with the date of entry

End of Month

• Total and Prove as usual at the end of the month

• Write the date, TOTAL, and total each column.

• Debit Columns=Credit Columns

10.3 Review- p. 239

• Audit Your Understanding #1-3

• Work Together #4-5

• On Your Own #6-7

10.4 Journalizing Other Transactions

• Record other transactions in the General Journal- not in Purchases Journal, Cash Payments, Sales or Cash Receipts

Buy Supplies on Account

• Invoice is sent- Source Document is a Memorandum (not purchase invoice)

• November 6. Bought Store Supplies on account from Foxfire Supply, $210.00. Memorandum #52

• Two accounts are affected in General Journal- Supplies & A/P-Foxfire

• Journalize the same way as you already know

Merchandise Withdrawal

• November 12. Karl Koehn, partner, withdrew merchandise for personal use, $300.00. Memorandum #53

• Debit- K.Koehn Drawing; Credit-Purchases

10.4 Review- p. 243

• Audit Your Understanding #1-5

• Work Together #6

• On Your Own #7

The End.....