Chapters 10
 Partnership

A business with two or more owners combining
their assets and skills
 Partner

Each member/owner of a partnership
Lesson 10.1
 Merchandising

A business that purchases and sells goods
 Retail

Business
Merchandising Business
A merchandising business that sells to those who
use or consume the goods
 Merchandise

Goods that a merchandising business purchases
to sell
 Wholesale

Merchandising Business
A business that buys and resells merchandise to
retail merchandising businesses
 5-Column


vs. 11-Column
The number of amount columns
Encore Music – 5-Column Journal
 Omni

Imports – 11-Column Journal
New special amount columns:

A/R, A/P, Purchases Dr., Sales Tax Payable Cr.
 Special


amount columns
For accounts that are used frequently
To save time and space
 Cost
of Merchandise/Cost of Goods Sold
(COGS)

The price a business pays for goods it will sell
 Markup

The amount added to the cost of merchandise to
establish the selling price
 Vendor

The business which merchandise, supplies, or
other assets are bought
 CONCEPT:

Historical Cost
Amount paid for merchandise or other items
bought is recorded
 Cost


account
Because it is in the
cost of merchandise
division of the chart
of accounts
Purchases
Debit
Look at Omni Imports Chart
of Accounts on p. 225
 Temporary
Account
 ONLY merchandise
purchases (not
supplies or any other
purchase)
normal
Credit
Purchases
 November

1
Purchased
merchandise for
cash, $575.00.
Check No. 290.
575.00
Cash
575.00
Page 232
Lesson 10-2
 Purchase



An invoice used as a source document for
recording a purchase on account transaction
Created by the vendor
Omni Imports give the invoice its own number
 Terms


Invoice
of Sale
An agreement between a buyer and seller about
payment for merchandise
Ex: 30days (payment is due within 30 days of the
vendor’s date of the invoice)
Purchases
 November

2
Purchased
merchandise on
account from Crown
Ltd., $2,039.00.
Purchase Invoice
No. 83.
2,039.00
Accounts Payable
2,039.00
Supplies - Office
 November
5

Paid cash for office
supplies, $34.00.
Check No. 292

Office Supplies are
supplies used in general
business operations (paper,
pens, price tags, etc.)
34.00
Cash
34.00
Supplies - Store
 November


6
Bought store
supplies on account
from Foxfire Supply,
$210.00.
Memorandum No. 52
An invoice is received from
the vendor when buying on
account, to avoid
confusion a memo is
attached and used as the
source document
210.00
Accounts Payable
210.00
Page 237
Lesson 10-3
Accounts Payable
 November


7
Paid cash on
account to Pacific
Imports, $1,050.00,
covering Purchase
Invoice No. 81.
Check No. 294
Check no. is used as the
source doc because it is
our source
1,050.00
Cash
1,050.00
Advertising Expense
 November

9
Paid cash for
advertising,
$150.00. Check No.
296.
150.00
Cash
150.00
Supplies - Office
 November

9
Paid cash to
replenish the petty
cash fund, $205.00:
office supplies,
$35.00; store
supplies, $47.00;
advertising, $92.00;
miscellaneous,
$31.00. Check No.
297
35.00
Supplies - Store
47.00
Advertising Expense
92.00
Miscs Expense
31.00
Cash
205.00
Michelle Wu, Drawing
 November

10
Michelle Wu,
partner, withdrew
cash for personal
use, $1,200.00.
Check No. 298.
1,200.00
Cash
1,200.00
Karl Koehn, Drawing
 November

12
Karl Koehn, partner,
withdrew
merchandise for
personal use,
$300.00.
Memorandum No.
53.
300.00
Purchases
300.00
Page 243 and 246
Chapter 11
Sales Tax Payable
 Customer

A person or business to
whom merchandise or
services are sold
 Sales

Debit
Credit
Tax
A tax on a sale of
merchandise or services
Price of Goods
x
$300.00
x
Price of Goods
$300.00
Sales Tax Rate
normal
=
Sales Tax
6%
=
$18.00
+
Sales Tax
=
Total Amt Received
+
$18.00
=
$318.00
Lesson 11.1
 CONCEPT:

No matter when payment is made revenue is recorded
at the time of sale
 Cash

Sale
A sale where cash is received at the time of sale
 Credit



Card Sale
A sale where a credit card is used at the time of sale
Major bank approved credit cards: VISA,
MasterCard, Discover
 Credit

Realization of Revenue
card slip
Totaled and recorded at the end of each week
Source Document – Cash Register Tape
1.
2.
3.
4.
5.
6.
7.
Omni Imports creates a cc slip for each cc sale
All cc slips sent to bank each week with
weekly deposit to Omni’s bank
Omni’s bank accepts the cc slips the same
way it accepts cash for deposit
If a cc was issued by another bank, Omni’s
bank sends the cc slip to the issuing bank
The issuing bank bills the customer and
collects the amount owed
The bank that accepts and processes the cc
slip for a business charges a fee for the
service
The fee is included on Omni’s monthly bank
statement
 November

4
Recorded cash and
credit card sales,
$5,460.00, plus sales
tax, $327.60; total
$5,787.60. Cash
Register Tape No. 4.
Cash & cc sales recorded in same
deposit
 Cash Register Tape is numbered
based on the day of the month
(T4)
 The month of November started
on a Wednesday – short week of
sales
Cash
5,787.60
Sales
5,460.00

Sales Tax Payable
327.60
 Sale

on account
A sale where cash is received later
 Invoice



Prepared when merchandise is sold on account
Describes the goods, quantity, and price
Sales Invoice - Source document for recording a sale
on account (CONCEPT: Objective Evidence)

3

A.k.a. – sales ticket, sales slip
copies:
Customer, Shipping Dept., Accounting Dept.
 November


3
Accounts Receivable
Sold merchandise on
account to Children’s
paradise, $816.00,
plus sales tax, $48.96;
total, $864.96. Sales
Invoice No. 76.
Sales
Even though cash is not received
yet we still record the sale
(CONCEPT: Realization of
Revenue)
864.96
816.00
Sales Tax Payable
48.96
 November

6
Received cash on
account from Fiesta
Costumes, $2,162.40,
covering $69. Receipt
No. 90.

Omni prepares a receipt
whenever cash is received and
uses it as the source document

2 copies: customer, accounting
dept.
Cash
2,162.40
Accounts Receivable
2,162.40
Page 259
Lesson 11.2
 Prove
a Journal
Rule single line above last line of all amount
columns
Date
Write “Carried Forward” in the account title column
Check mark in “Post. Ref.” column
Total all amount columns below single underline
Verify that the Debits = Credits using the form on
page 260
Double underline below all totals in the amount
columns
1.
2.
3.
4.
5.
6.
7.

Account totals are verified as correct
 Bring
amounts forward to next Journal
page
1.
2.
3.
4.
5.
Write the new Journal page number on both
pages of journal (expanded journal goes on two
pages)
Date (same as last line of previous page)
Write “Brought Forward” in the account title
column
Check mark in “Post. Ref.” column
Bring all totals forward from previous journal
page
 Prove
the Journal page at the end of the
month
1.
2.
3.
4.
5.
Single underline
“Totals” written in account title column
Total all amount columns
Verify that the Debits = Credits using the form
on page 260
Double underline below totals
 Prove

Using the form on page 264:
1.
2.
3.

cash at the end of the month
Add all cash received during the month (Cash debit
column) to the previous cash balance and subtotal
Subtract all cash spend during the month (Cash
credit column) to the subtotal and total
Match this amount with the amount on your last
unused check stub
Cash balance on your Journal MUST agree with
the cash balance on your last unused check stub
Page 266