Chapter 9
Accounting 1
 Read

about Office Max (p. 233)
Be prepared to discuss answers to questions
 Read
about corporations (p. 234)
 Owner
– Janice Kellogg
 Sells
a wide variety of art and hobby supplies
to individuals, schools, and businesses
 Corporation


Has stockholders who have invested
Exists independent of its owners

Will continue beyond Janice’s lifetime
A
merchandising business

Merchandise – goods that a business purchases to
sell

Merchandising business – a business that
purchases and sells goods

Retail merchandising business – buys and sells
merchandise to those who consume the goods

Wholesale merchandising business – buys and
resells merchandise to retail merchandising
businesses
 There
are many kinds of journals that can be
used and the choice depends on the needs of
the business.
 The
greater a business’s daily transactions,
the more “special journals” that may be used
 Special
Journal – a journal used to record
only one kind of transaction
Hobby Shack uses five (5) special journals

Purchase Journals


Cash Payment Journal


All sales of merchandise on account
Cash Receipts Journal


All cash payments
Sales Journal


All purchases of merchandise on account
All cash receipts
General Journal

All other transactions
 Vendor
– a business from which merchandise
is purchased or supplies or other assets are
bought
 Cost
of merchandise – the price a business
pays for goods it purchases to sell


Selling price must be greater than cost of
merchandise for business to make profit
Markup: amount added to cost of merchandise to
establish selling price

Only markup increases capital

Costs of merchandise are kept separately


Chart of Accounts, p. 231
5000 accounts


“Purchases” – A temporary account used for purchasing
merchandise ONLY
Debit increases, Credit decreases (p. 236)
 Normal debit balance because it takes from capital
 Accounting

Concept Historical Price
Applied when actual amount paid for
merchandise or other items bought is recorded
Pay cash for merchandise OR
 Purchase on account – a transaction in which the
merchandise purchased is to be paid for later


Accounts payable account
(p. 236)
Purchases journal – special journal used to
record only purchases of merchandise on account
 Amount column has two account titles in
heading:

Purchases Dr.
Accts. Pay. Cr.
1.
2.


Special amount column – journal amount column headed
with account title; used for frequently occurring trans.
Eliminates writing general ledger account titles in
Account Title Column and saves time

All purchases on account transactions are recorded in
purchases journal


If purchase made for cash, transaction NOT recorded in
purchases journal
Every purchase on account will have a purchase invoice



This is a form describing goods sold, quantity, and price and is used
as a source document for recording a purchase on account
transaction (Objective Evidence)
Review p. 238
Steps to “check” a purchase invoice:
 Stamp date received
 Place check mark by each amount
 Initial total
 Review terms of sale: agreement between buyer and seller
about pmt.
PURCHASES JOURNAL
DATE
ACCOUNT CREDITED
PAGE
PURCH. NO.
POST.
REF.
PURCHASES DR.
ACCTS. PAY. CR.
1
1
2
2
3
3
4
4
5
5
 All
transactions recorded in purchase journal
are a debit of purchases and a credit of
accounts payable
 Must
always write the vendor name in the
account title column
 Always
month

total and rule at the end of the
Review p. 239 and 240
November 2. Purchased merchandise on account from Crown
Distributing, $2,039.00. Purchase Invoice No. 83.
PURCHASES JOURNAL
DATE
ACCOUNT CREDITED
PAGE
PURCH. NO.
POST.
REF.
PURCHASES DR.
ACCTS. PAY. CR.
2013
1
Nov
2
Crown Distributing
83
2039.00
1
2
2
3
3
4
4
5
5
At the end of the month, the Purchases
Journal is totaled and ruled.
 WT
9-1
 OYO 9-1
 App 9-1