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.....