Merchandising Business
 Goods that a business purchases to sell are called merchandise.
 A business that purchases and sells goods is called a
merchandising business.
 A merchandising business that sells to those who use or
consume the goods is called a retail merchandising business.
 A business that buys and resells merchandise to retail
businesses is called a wholesale merchandising business.
 Service and merchandising businesses use many of the same
accounts. A merchandising business has additional accounts on
the balance sheet and income statement to account for the
purchase and sale of merchandise.
Hobby Shack
 Janice Kellogg decided to quit her full-time job and turn her
ceramic hobby into a retail business. She developed a plan to
rent space in a shopping center and operate Hobby Shack six
days a week. Hobby Shack would sell a wide variety of art and
hobby supplies to individuals, schools, and businesses. Janice
planned to expand the merchandise she offers, rent store and
office equipment, and employ other individuals to work in the
store. However, Janice did not personally have the capital to
implement her plan. But with the help of a small group of
investors, Janice formed a corporation called Hobby Shack, Inc.
Each stockholder received a number of shares of stock based
on the amount invested.
 Unlike a proprietorship, a corporation exists independent of its
owners. Janice expects the Hobby Shack to continue beyond
her lifetime and plans to give her shares of stock to her
children.
Using Special Journals
 A business with limited number of daily transactions may
record all entries in one journal. A business with many
daily transactions may choose to use a separate journal
for each kind of transaction. A journal used to record only
one kind of transaction is a special journal.
 Hobby Shack uses five journals for their transactions:
 Purchases Journal-for all purchases of merchandise on
account
 Cash Payments Journal- for all cash payments
 Sales Journal- for all sales of merchandise on account
 Cash Receipts Journal-for all cash receipts
 General Journal-for all other transactions
Purchasing Merchandise
 The price a business pays for goods it purchases to
sell is called cost of merchandise.
 The amount added to the cost of merchandise to
establish the selling price is called markup.
 Example: The markup cost of an iPhone is $199.00.
So if a retail value is $650 for an iPhone. What
would be the cost of merchandise for an iPhone?
 A business from which merchandise is purchased or
supplies or other assets are bought is called a
vendor.
Purchasing Merchandise
 The account used for recording the cost of
merchandise is titled Purchases.
 Classified as a cost account; cost of merchandise
division of chart of accounts
 Temporary account
 Reduces capital when the merchandise is purchased;
Purchases has a normal debit balance
PURCHASING
MERCHANDISE
LESSON 9-1
7
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Purchases on Account
 A transaction in which the merchandise purchased is
to be paid for later is called a purchase on account.
PURCHASES ON ACCOUNT
LESSON 9-1
9
page 236
Purchases Journal
 A special journal used to record only purchases of
merchandise on account is called a purchases
journal.
 The amount column has two account titles in it’s
heading: Purchases Debit and Accts. Payable Credit
 A journal account column headed with an account
title is called a special amount column.
PURCHASES JOURNAL
LESSON 9-1
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page 237
Purchase Invoice
 An invoice used as a source document for recording
a purchase on account transaction is called a
purchase invoice.
 Name other types of source documents from Part I?
PURCHASE INVOICE
page 238
1
4
2
3
1. Stamp the date received and
purchase invoice number.
3. Initials of the person who
checked the invoice.
2. Place a check mark by each amount.
4. Review the vendor’s terms.
LESSON 9-1
13
5. Terms of Sale
PURCHASING MERCHANDISE
ON ACCOUNT
November 2. Purchased merchandise on account from Crown
Distributing, $2,039.00. Purchase Invoice No. 83.
2
1
1.
2.
3.
4.
3
Write the date.
Write the vendor name.
Write the purchase invoice number.
Write the amount of the invoice.
LESSON 9-1
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4
page 239
TOTALING AND RULING A
PURCHASES JOURNAL
page 240
1
4
3
5
2
1. Rule a single line across
the amount column.
2. Write the date.
3. Write the word Total.
LESSON 9-1
4. Add the amount column.
5. Write the total.
6. Rule double lines across
the amount column.
15
6
TERMS REVIEW
 merchandise
 special journal
 merchandising business
 cost of merchandise
 retail merchandising
business
 markup
 vendor
 wholesale merchandising
business
 purchase on account
 corporation
 purchases journal
 share of stock
 special amount column
 capital stock
 purchase invoice
 stockholder
 terms of sale
LESSON 9-1
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