Chapter 9Journalizing Purchases and Cash

Payments

Merchandising Corporation Retail vs. Wholesale

Retail-sells directly to the customer

Wholesale-sells to the retailer

Corporation vs Sole Proprietorship Capital Stock vs Capital

Shares of Stock- unit of ownership

Shareholders/stockholders- individuals who own 1 or more share of stock

Special Journals Purchases- purchases on account Cash Payments- cash credits Sales- sales on account Cash Receipts- cash debits General- any other transaction

Merchandising Business Purchasing Merchandise - items that are

purchased from a vendor and will be sold Cost of Merchandise Markup- usually a % of cost Selling Price Cost of Merch. + Markup = Selling Price

Purchasing Merchandise With Cash

Purchases debited Cash credited

Cash Payments journal

On Account

Purchases debited Accounts Payable

credited

Purchases journal

Concept: Historical Cost The actual amount paid is the amount

recorded on the books.

The Purchases Journal

Purchases Invoice

Cash Payments journal- cash credit

Cash Discount Given by the vendor to encourage prompt

payment. Vendor allows a reduction in the invoice

amount. Example: Purchases Discount

Other Discounts List price- the retail price listed in a catalog

or Internet site Trade discount- a reduction in list price

granted to customers for ordering larger quantities of merchandise