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LESSON 9-1LESSON 9-1
Journalizing Purchases Using a Purchases Journal
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New VocabularyNew Vocabulary
Merchandise: Goods that a business purchases to sell
Merchandising business: A business that purchases and sells goods
Retail 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 businesses
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New VocabularyNew Vocabulary
Corporation: An organization with the legal rights of a person and which many persons may own
Share of stock: Each unit of ownership in a corporation
Capital stock: Total shares of ownership in a corporation
Stockholder: An owner of one or more shares of a corporation
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New VocabularyNew Vocabulary
Special journal: A journal used to record only one kind of transaction
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 are others assets are bought
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New VocabularyNew Vocabulary Purchase on account: A transaction in which the
merchandise purchased is to be paid for later 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
Purchase invoice: An invoice used as a source document for recording a purchase on account transaction
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PURCHASING MERCHANDISEPURCHASING MERCHANDISE page 236
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PURCHASES ON ACCOUNTPURCHASES ON ACCOUNT page 236
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PURCHASES JOURNALPURCHASES JOURNAL page 237
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1. Stamp the date received andpurchase invoice number.
PURCHASE INVOICEPURCHASE INVOICE11
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4. Review the vendor’s terms.
3. Initials of the person whochecked the invoice.
2. Place a check mark by each amount.
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PURCHASING MERCHANDISE PURCHASING MERCHANDISE ON ACCOUNTON ACCOUNT
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November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83.
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TOTALING AND RULING A TOTALING AND RULING A PURCHASES JOURNALPURCHASES JOURNAL
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Audit Your UnderstandingAudit Your UnderstandingWhat kinds of transactions are recorded in a purchases
journal? Purchases of merchandise on accountFor what are special amount columns in a journal used? Frequently occurring transactionsWhy are there two account titles in the amount column of the
purchases journal? Because the same two accounts are always affected by
purchase on account transactionsWhat is the advantage of having special amount columns in a
journal? Time is saved because it eliminates writing the account
title
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LESSON 9-2LESSON 9-2
Journalizing Cash Payments Using a Cash Payments Journal
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CASH PAYMENTS JOURNALCASH PAYMENTS JOURNAL page 242
Cash Payments Journal: A special journal used to record only cash payment transactions
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CASH PAYMENT OF AN CASH PAYMENT OF AN EXPENSEEXPENSE page 243
November 2. Paid cash for advertising, $150.00. Check No. 292.
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BUYING SUPPLIES FOR CASHBUYING SUPPLIES FOR CASH page 243
November 5. Paid cash for office supplies, $94.00. Check No. 293.
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CASH PAYMENTS FOR CASH PAYMENTS FOR PURCHASESPURCHASES page 244
November 7. Purchased merchandise for cash, $600.00. Check No. 301.
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New VocabularyNew Vocabulary
Cash Discount: A deduction that a vendor allows on the invoice amount to encourage prompt payment
Purchases Discount: A cash discount on purchases taken for paying early
General amount column: A journal amount column not headed with an account title
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New VocabularyNew Vocabulary
List price: The retail price listed in the catalog or on an Internet site
Trade discount: A reduction in the list price granted to customers
Contra account: An account that reduces a related account on a financial statement
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CASH PAYMENTS ON ACCOUNT CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTSWITH 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.
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CASH PAYMENTS ON ACCOUNT CASH PAYMENTS ON ACCOUNT WITH NO PURCHASES DISCOUNTSWITH NO PURCHASES DISCOUNTSpage 246
November 13. Paid cash on account to American Paint, $2,650.00, covering Purchase Invoice No. 77. Check No. 303.
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Audit Your UnderstandingAudit Your Understanding
Why would a vendor offer a cash discount to a customer?
To encourage early paymentWhat is recorded in the general
amount columns of the cash payments journal?
Cash payment transactions that do not occur often
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Audit Your UnderstandingAudit Your Understanding
What is the difference between purchasing merchandise and buying supplies?
A business purchases merchandise to sell but buys supplies for use in the business. Supplies are not intended for sale.
What is meant by the terms of sale 2/10, n/30? 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 30 means the total invoiced amount must be paid within 30 days.
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LESSON 9-3LESSON 9-3
Performing Additional Cash Payments Journal Operations
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New VocabularyNew Vocabulary
Cash short: A petty cash on hand amount that is less than the recorded amount
Cash over: A petty cash on hand amount that is more than a recorded amount
Cash Short and Over Account
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PETTY CASH REPORTPETTY CASH REPORT
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6. Write the actual amount of cash on hand. 88
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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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REPLENISHING A PETTY CASH REPLENISHING A PETTY CASH FUNDFUND
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1. Date2. Account titles3. Check number4. Expense amounts5. 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 TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL PAGE TO CASH PAYMENTS JOURNAL PAGE TO CARRY TOTALS FORWARDCARRY TOTALS FORWARD page 250
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STARTING A NEW CASH STARTING A NEW CASH PAYMENTS JOURNAL PAGEPAYMENTS JOURNAL PAGE page 251
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TOTALING, PROVING, AND RULING A CASH TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL PAYMENTS JOURNAL AT THE END OF A AT THE END OF A MONTHMONTH page 252
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Audit Your UnderstandingAudit Your Understanding
When journalizing a cash payment to replenish petty cash, what is entered in the account title column of the cash payments journal?
The titles of the account for which the petty cash fund was used. Example: Supplies, Misc. Expense, etc.
What is the usual balance of the account cash short and over?
The balance is usually a debit because the petty cash fund is more likely to be short than over
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LESSON 9-4LESSON 9-4
Journalizing Other Transactions Using a General Journal
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New VocabularyNew Vocabulary
Purchases returned: 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
Debit memorandum: A form prepared by the customer showing the price deduction taken by the customer for returns and allowances
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MEMORANDUM FOR BUYING MEMORANDUM FOR BUYING SUPPLIES ON ACCOUNTSUPPLIES ON ACCOUNT page 254
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BUYING SUPPLIES ON BUYING SUPPLIES ON ACCOUNTACCOUNT page 255
November 6. Bought store supplies on account from Gulf Craft Supply, $210.00. Memorandum No. 52.
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DEBIT MEMORANDUM FOR PURCHASES DEBIT MEMORANDUM FOR PURCHASES RETURNS AND ALLOWANCESRETURNS AND ALLOWANCES page 256
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November 28. Returned merchandise to Crown Distributing, $252.00, covering Purchase Invoice No. 80. Debit Memorandum No. 78.
JOURNALIZING PURCHASES JOURNALIZING PURCHASES RETURNS AND ALLOWANCESRETURNS AND ALLOWANCES page 257
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Audit Your UnderstandingAudit Your Understanding
What journal is used to record transactions that cannot be recorded in special journals?
General journalWhy is a memorandum used as the source
document when supplies are bought on account?
To specify that the invoice is for store supplies and not for purchases, ensuring that no mistake is made when journalizing the transaction.
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Today’s ChuckleToday’s ChuckleMr. and Mrs. Fenton are retired,
and Mrs. Fenton insists her husband go with her to Wal-Mart. He gets so bored with all the shopping trips. He prefers to get in and get out, but Mrs. Fenton loves to browse. One day Mrs. Fenton gets this letter from Wal-Mart:
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Dear Mrs. Fenton,
Over the past six months, your husband has been causing quite a commotion in our store. We cannot tolerate this behavior and may ban both of you from our stores. We have documented all incidents on our video surveillance equipment. The complaints against Mr. Fenton are listed below:
Things Mr. Bill Fenton has done while his spouse was shopping in Wal-Mart:
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1.June 15: Took 24 boxes of condoms and randomly put them in people's cart when they weren't looking.
2.July 2: Set all the alarm clocks in House wares to go off at 5-minute intervals.
3.July 7: Made a trail of tomato juice on the floor leading to the ladies rest rooms.
4.July 19: Walked up to an employee and told her, in an official tone, 'Code 3' in house wares. . . . . and watched what happened.
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August 4: Went to the Service Desk and asked to put a bag of M&M's on layaway.
September 14: Moved a 'CAUTION - WET FLOOR' sign to a carpeted area.
September 15: Set up a tent in the camping department and told other shoppers he'd invite them in if they'll bring pillows from the bedding department.
September 23: When a clerk asks if they can help him, he begins to cry and asks, 'Why can't you people just leave me alone?'
October 4: Looked right into the security camera; used it as a mirror, and picked his nose.
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November 10: While handling guns in the hunting department, asked the clerk if he knows where the antidepressants are.
December 3: Darted around the store suspiciously loudly humming the "Mission Impossible" theme.
December 6: In the auto department, practiced his "Madonna look" using different size funnels.
December 18: Hid in a clothing rack and when people browse through, yelled "PICK ME!" "PICK ME!"
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December 21: When an announcement came over the loud speaker, he assumes the fetal position and screams "NO! NO! It's those voices again!!!!"
And last, but not least—December 23: Went into a fitting room, shut the door, waited awhile, and then yelled very loudly, "There is no toilet paper in here!"
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The EndThe End