Accounting for Merchandising Businesses
LO 3b – Recording
Purchase Transactions
@ 2012, Cengage Learning
LO 3
Chart of Accounts
LO 3
Purchase Transactions
On January 3, NetSolutions purchased merchandise for
cash.
*
NOTE: We will assume a perpetual
inventory system is used.
LO 3
Purchase Transactions
On January 4, NetSolutions purchased merchandise on
account from Thomas
Corporation.
*
LO 3
Purchases Discounts
A buyer may receive a discount from the
seller (sales discount) for early payment of the
amount owed. From the buyer’s perspective,
such discounts are called purchases discounts.
LO 3
Purchase Transactions
Alpha Technologies issued an invoice for $3,000
to NetSolutions dated March 12, with terms 2/10,
n/30. NetSolutions is trying to determine if it
should pay the invoice within the discount period.
LO 3
Purchase Transactions
If NetSolutions can borrow cash at an annual
interest rate of 6%, should the firm borrow cash to
pay the invoice within the discount period?
Discount of 2% on $3,000
Interest for 20 days at the rate
of 6% on $2,940
Savings from borrowing
YES
$60.00
– 9.80
$50.20
LO 3
Purchase Transactions
LO 3
Discount Not Taken
Assume that instead of paying the invoice within the
discount period, NetSolutions pays the invoice on
April 11.
LO 3
Purchases Returns and Allowances
A purchases return involves actually
returning merchandise that is damaged or does
not meet the specifications of the order. From
a buyer’s perspective, such returns are called
purchases returns and allowances.
LO 3
Debit Memo
A debit memorandum, often called a debit
memo, informs the seller of the amount the
buyer proposes to debit to the account payable
due the seller.
LO 3
Debit Memo
LO 3
Debit Memo
NetSolutions records the return of the merchandise
indicated in the debit memo in Exhibit 9 as follows:
LO 3
Merchandise Purchased
On May 2, NetSolutions purchased $5,000 of
merchandise on account from Delta Data Link, terms
2/10, n/30.
LO 3
Merchandise Returned
On May 4 , NetSolutions returned $3,000 of the
merchandise purchased from Delta Data Link.
LO 3
Invoice Paid
On May 12, NetSolutions paid for the purchase of
May 2 less the return and discount.