LESSON 9-1 - Journalizing Purchases Using a Purchases 9...... Journalizing Purchases Using a...

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  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    LESSON 9-1 - Journalizing Purchases Using a Purchases Journal

    Service business vs. merchandising business Service business sells services for a fee nail salon, attorney Merchandising business purchases and sells goods t-shirts,

    sports equipment Retail merchandising business sells goods to those who use or

    consume the goods (Target, Wal Mart, etc.) Wholesale merchandising business buys and resells

    merchandise to retail merchandising businesses (company that sells merchandise to Target or Wal Mart)

    Merchandising business uses many of the same accounts as a service business, but it will have additional accounts for the purchase and sale of merchandise (chart of accounts, pg. 231)

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    Business Structures Sole Proprietorship

    Owned by one person limits resources for the business Corporation organization with the legal rights of a person and which

    many person may own Formed by receiving approval from a state or federal agency Can own property, incur liabilities, and enter into contracts in its own name

    Share of stock a unit of ownership Capital stock total shares of ownership Stockholder an owner of one or more shares of a corporation Biggest difference between proprietorship and corporation is capital

    accounts Special Journal used to record only one kind of transaction

    2

    LESSON 9-1

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    PURCHASING MERCHANDISE

    Cost of merchandise price a business pays for goods it purchases

    Mark-up amount added to cost of merchandise to establish selling price Mark-up is needed in order to earn a profit

    Vendor a business from which merchandise or other supplies is bought

    3

    LESSON 9-1

    page 236

    Purchases account used for recording the cost of merchandise -cost account (reduces capital) -temporary account

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    PURCHASES ON ACCOUNT

    Purchases on account transaction in which the merchandise purchased is to be paid for later CONCEPT: Historical Cost actual amount paid for merchandise or

    other items bought is recorded Businesses that purchase from many vendors have many accounts for

    vendors Accounts Payable summarizes the total amount owed all vendors

    4

    LESSON 9-1

    page 236

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    PURCHASES JOURNAL

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

    Special amount column journal amount column headed with an account title Special amount columns are used for frequently occurring transactions Eliminates writing general ledger account titles in the Account Title

    column and saves time

    5

    LESSON 9-1

    page 237

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    6

    LESSON 9-1

    2

    1. Stamp the date received and purchase invoice number.

    PURCHASE INVOICE form describing the goods sold, quantity, and price

    1

    3

    4

    page 238

    4. Review the vendors terms.

    3. Initials of the person who checked the invoice.

    2. Place a check mark by each amount.

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    7

    LESSON 9-1

    PURCHASING MERCHANDISE ON ACCOUNT

    1 2

    3 4

    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.

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    8

    LESSON 9-1

    TOTALING AND RULING A PURCHASES JOURNAL

    2 3 4 5

    page 240

    1

    6 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.

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    9

    LESSON 9-1

    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

    page 241

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    LESSON 9-2

    Journalizing Cash Payments Using a Cash Payments Journal

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    CASH PAYMENTS JOURNAL

    Cash Payments Journal special journal used to record only cash payment transactions

    Cash discount deduction that a vendor allows on the invoice amount to encourage prompt payment Purchase discount cash discount on purchases taken by a

    customer

    General amount column amount column that is not headed with an account title (ex. Monthly rent)

    Source document is usually a check

    11

    LESSON 9-2

    page 242

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    12

    LESSON 9-2

    CASH PAYMENT OF AN EXPENSE 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.

    1 2 3 4 5

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    13

    LESSON 9-2

    BUYING SUPPLIES FOR CASH 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.

    1 2 3 4 5

    Supplies are not recorded in the Purchases account because supplies are not intended for sale.

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    14

    LESSON 9-2

    CASH PAYMENTS FOR PURCHASES page 244

    November 7. Paid Cash to XYZ Company for merchandise with a list price of $1,500.00, less a 60% trade discount. 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.

    1 2

    3 4 5 100% - 60% discount= 40% $1500.00 x 40% = $600.00

    List price retail price listed in a catalog or on website Trade discount reduction in the list price granted to customers

    Invoice amount

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS

    2/10, n/30 common term of sale read two ten, net thirty Two ten means that 2% of the invoice amount may be deducted if

    the invoice is paid within 10 days of the invoice date Net Thirty means that the total invoice amount must be paid within

    30 days

    Purchases discount general ledger account used to record discounts on purchases Contra account account that reduces a related account

    Balance is opposite the balance of the related account (Purchases normal debit balance; Purchases discount normal credit balance

    Cash discounts must be recorded because they decrease the recorded invoice amount

    15

    LESSON 9-1

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    16

    LESSON 9-2

    CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS 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.

    1 2 3

    4

    6. Write the credit amount.

    6 5

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    17

    LESSON 9-2

    CASH PAYMENTS ON ACCOUNT WITHOUT PURCHASES DISCOUNTS 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.

    1 2 3

    4 5

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    LESSON 9-3

    Performing Additional Cash Payments Journal Operations

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    PETTY CASH REPORT

    Errors may be made when making payments from a petty cash fund

    Cash short petty cash amount on hand is less than a recorded amount

    Cash over - petty cash amount on hand is greater than a recorded amount

    Cash Short and Over temporary account to record petty cash short and over

    19

    LESSON 9-1

    Cash Short and Over Debit Credit Cash short Cash over

  • CENTURY 21 ACCOUNTING 2009 South-Western, Cengage Learning

    20

    LESSON 9-3

    PETTY CASH REPORT

    2

    page 248

    6. Write the actual amount of cash on hand. 8

    4

    1

    3

    6 5 7

    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