Lesson Plan 7.2 – Analyze and Journalize Purchases
and Cash Payments
Course Title – Accounting I
Session Title – Analyze and Journalize Purchases and Cash Payments
Lesson Purpose – Demonstrate skill in analyzing and journalizing purchases
and cash payment transactions using a computerized accounting system.
Behavioral Objectives







Analyze transactions relating to purchases and cash payments.
Analyze transactions relating to contra cost of merchandise accounts.
Journalize transactions relating to purchases and cash payments.
Journalize transactions relating to contra cost of merchandise
accounts.
Calculate trade and purchase discounts.
Analyze posting of purchases and cash payments.
Analyze transactions with cash over and cash short in the petty cash
fund.
Preparation
TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates
to the following TEKS. Any
changes/alterations to the activities
may result in the elimination of any or
all of the TEKS listed.
120.42.C
2.b. analyze transactions relating to
purchase and sale of merchandise;
2.c. record transactions in special
journals;
4.f. open and replenish a petty cash
fund and journalize transactions;
7.a. follow oral and written
instructions;
7.b. develop time management skills
by setting priorities for completing
work as scheduled.
7.c. make decisions using
appropriate accounting concepts;
7.e. perform accounting procedures
using manual and automated
methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates
to the following TEKS. Any
changes/alterations to the activities
may result in the elimination of any or
all of the TEKS listed.
130.166.C
4.c. – journalize and post entries to
establish and replenish petty cash;
5. – The student performs accounting
functions specific for a merchandising
business. The student is expected to
explain the nature of special journals
and recording transactions in special
journals.
Lesson Plan 7.2 – Analyze and Journalize
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the
mathematical processes and tools used in problem solving.
Materials, Equipment and Resources:



Textbook
Accounting Software
Journal Input Forms
Teaching Strategies:


Observation
Graded Assignments
Lesson Content:
Instruction on trade and purchase discounts and the accounts related to these
types of transactions. Students analyze and journalize purchases and cash
payments, petty cash short and over and calculate petty cash short and over.
Assessment:


Observation
Graded Assignments
Additional Resources:
Textbooks:
Guerrieri, Donald J., Haber, Hoyt, Turner. Glencoe Accounting RealWorld Applications and Connections. Glencoe McGraw-Hill 2000.
ISBN/ISSN 0-02-815004-X.
Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 Accounting
Multicolumn Journal Anniversary Edition, 1st Year Course. SouthWestern Educational and Professional Publishing, 2003.
ISBN/ISSN: 0-538-43524-0
Ross, Kenton, Gilbertson, Lehman, and Hanson. Century 21 General
Journal Accounting Anniversary Edition, 7th Edition. SouthWestern Educational and Professional Publishing, 2003.
ISBN/ISSN: 0-538-43529-1.
Websites:
Glencoe College Accounting Practice Problems. 2003 Glencoe/McGrawHill. http://www.glencoe.com/qe/qe39pp.php?qi=833.
Lesson Plan 7.2 – Analyze and Journalize
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.2.1 – Identifying Terms – 7.2.1
Course Title – Accounting I
Session Title – Analyze and Journalize Purchases and Cash Payments
Activity Purpose – Identify terms related to corporations, purchases and cash
payment transactions.
TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
N/A
TAKS Correlation:
WRITING
Objective 5: The student will produce a piece of writing that demonstrates a
command of the conventions of spelling, capitalization, punctuation, grammar, usage,
and sentence structure.
Objective 6: The student will demonstrate the ability to revise and proofread to
improve the clarity and effectiveness of a piece of writing.
Materials, Equipment and Resources:





Textbook
Internet
Butcher Paper
Tape
Vocabulary Strips
Teaching Strategies:


Observation
Verbal Drill
Activity 7.2.1 – Identifying Terms
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Using index cards, define these terms:
common stock
corporation
list price
publicly held
corporation
purchases discount
purchases return
retained earnings
Proxy
share of stock
trade discount
board of directors
preferred stock
capital stock
cash discount
par value
cash short
purchases
allowance
dividends
cash over
debit
memorandum
capital stock
2. Ask your students to drill each other on the terms.
3. Have your students divide into teams of 3 or 4 and write the terms on
butcher paper. Post the butcher paper in different corners of the room or
walls of the room
4. Have your students use the definitions below and run a race to see which
team can match the definitions with the terms.
An organization with the legal rights of a person, which can be
owned by many persons
Each unit of ownership in a corporation
Total share of ownership in a corporation
A business’ printed or catalog price
A reduction in the list price granted customers
A deduction a vendor allows on the invoice amount to encourage
prompt payment
A cash discount on purchases taken by a customer
A petty cash on hand amount that is less than a recorded
amount
A petty cash on hand amount that is more than a recorded
amount
Credit allowed for the purchase price of returned merchandise,
resulting in a decrease in the customer’s accounts payable
Credit allowed for part of the purchase price of merchandise that
is not returned, resulting in a decrease in the customer’s
accounts payable
A form prepared by the customer showing the price deduction
taken by the customer for returns and allowances
Corporation in which stock is widely held, has a large market
and is usually traded on the New York Stock Exchange or the
American Stock Exchange
The entity that governs and is responsible for the affairs of a
corporation. Members are elected by the stockholders.
The amount assigned to each share of stock before it is sold
The stock when a corporation issues only one class of capital
stock
Giving the stockholders’ voting rights to someone else if they
Activity 7.2.1 – Identifying Terms
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
can not be present
Stock that has certain privileges over common stocks. Used to
appeal to as many investors as possible
Distribution of stock to shareholders
Assessment:


Observation
Quiz on Terms
Define Terms
1.
common stock
2.
proxy
3.
board of directors
4.
preferred stock
5.
debit memorandum
6.
retained earnings
7.
publicly held corporation
8.
dividends
9.
share of stock
10.
corporation
Activity 7.2.1 – Identifying Terms
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.2.2 – Analyzing and Journalizing Purchases
Discounts
Course Title – Accounting I
Session Title – Analyze and Journalize Purchases and Cash Payments
Activity Purpose – Analyze and journalize purchases discount entries.
TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
N/A
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:

Textbook
Teaching Strategies:



Observation
Demonstration
Verbal Drill
Activity 7.2.2 – Analyzing and Journalizing
Purchases Discounts
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Demonstrate calculations of trade discounts. Emphasize that the actual
price paid is the amount journalized with trade discounts.
Item
List
Price
Black Ink
Cartridges
White 8 ½ x 11
Paper
CD-RWs
Laptop
Computers
$23.50
ea
$2.50
rm
$.88 ea
$2,250.
00
Numbe
r
Purcha
sed
Actual
Trade Price Paid
Disco (Amount
unt
Journalize
d)
200
5% =23.50*200*
5%
4,000
6%
400
10
3%
7%
2. Explain cash discounts and the meaning of 2/10, n/30. Discuss why a
business gives a business customer a cash discount.
3. Explain the contra account Purchases Discount. Demonstrate the normal
balance side of Purchases Discount and why it is a normal credit balance.
4. Model calculations of a purchases discount. You might want to also use “T”
accounts to model the transactions.
Terms on
Invoice
2/10, n/30
n/EOM
3/10, n/30
1/10, n/EOM
Invoice
Amount
$2,150.00
$909.00
$5,500.00
$427.00
Cash
Discount
=2150*2%
5. Model analysis of the above purchases discounts for journal entries. For
further practice, you might want to ask your students to create the written
word problem from the table.
When Purchased
When Paid
Purchase Accts. Accts. Purch. Cash
s DR
Pay
Pay DR Disct.
CR
CR
CR
2,150.00 2,150. 2,150.0
43.00 2,107.
00
0
00
909.00 909.00
5,500.00 5,500.
00
427.00 427.00
Emphasize that Accounts Payable is always debited for the original amount
of the invoice; otherwise, there would be no explanation for that amount.
Activity 7.2.2 – Analyzing and Journalizing
Purchases Discounts
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Also emphasize that debits equal credits after each transaction. Mention
that Purchases Discount will reduce the total amount of Purchases for the
fiscal period.
6. Have students enter these transactions in a Purchases Journal Input Form
and a Cash Payments Journal Input Form.
7. Ask students to enter the transactions using computerized accounting
software. To make it easier, you might want to have them use the same
accounts payable account for all four transactions. This can be one that is
already set up in the system. Use the current or appropriate date.
Assessment:


Observation
Graded Assignment
Quality Feature
Score
Takes notes
Participates in calculations of problems in class
Answers verbal drills accurately
Transactions entered in the correct forms with the correct
amounts and accounts
Transactions entered in the computer accurately
Completes in a timely manner
Activity 7.2.2 – Analyzing and Journalizing
Purchases Discounts
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.2.3 – Analyzing and Journalizing Purchases
Returns and Allowances
Course Title – Accounting I
Session Title – Analyze and Journalize Purchases and Cash Payments
Activity Purpose – Analyze and journalize purchases returns and allowances
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
7.e. – process sales orders, invoices,
returns, and allowances
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:

Textbook
Teaching Strategies:



Observation
Demonstration
Verbal Drill
Activity 7.2.3 – Analyzing and Journalizing
Purchases Returns and Allowances
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Explain the contra Purchases account, Purchases Return and Allowances.
Use a visual like a cracked glass and an article of clothing with a missing
button or a tear that can be repaired. Explain that these accounts can be
separated to have a Purchases Return account and a Purchases Allowances
account, but unless the business has a lot of these, it is simpler to put them
together. The amount of Purchases and Returns can also be placed directly
in the Purchases account, but doing this, makes it harder to locate the
amount of purchases returns and allowances for financial decision-making.
2. Demonstrate the normal balance side of this account, using Purchases
Discount as an example. Explain the increase and decrease side of the
account and its affect on Purchases. Use “T” accounts to demonstrate the
sides of the accounts.
3. Demonstrate these transactions:
Transaction
Purchased merchandise on
account from Joyles, Inc.,
$925.00.
Returned broken
merchandise to Joyles, Inc.
$500.00
Purchased merchandise on
account from ABC, Inc.
$2,500.00
Returned merchandise from
ABC, Inc. $22.50
Paid cash for merchandise
$990.00
Returned merchandise from
cash transaction $220.00
Account DR
Purchases $925.00
Accounts
Payable/Joyles,
Inc. $500.00
Purchases
$2,500.00
Accounts
Payable/ABC, Inc.
$22.50
Purchases $990.00
Cash $220.00
Account CR
Accounts
Payable/Joyles,
Inc. $925.00
Purchases Ret.
and Allow. $500.00
Accounts
Payable/ABC, Inc.
$2,500.00
Purchases Ret.
and Allow. $22.50
Cash $990.00
Purchases Ret.
and Allow. $220.00
4. Use the appropriate input forms for journalizing these entries.
5. Enter the information using a computerized software application.
Assessment:


Observation
Graded Assignment
Quality Feature
Score
Takes notes
Participates in class discussion
Participates and appropriately answers verbal drills
Correct input forms used
Transactions correctly entered in software application
Completes in a timely manner
Activity 7.2.3 – Analyzing and Journalizing
Purchases Returns and Allowances
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity 7.2.4 – Proving Petty Cash
Course Title – Accounting I
Session Title – Analyze and Journalize Purchases and Cash Payments
Activity Purpose – Prove petty cash and journalize transactions.
OLD TEKS Correlations:
2010 TEKS Correlations:
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
120.42.C
4.f. open and replenish a petty cash
fund and journalize transactions;
7.a. follow oral and written instructions;
7.b. develop time management skills by
setting priorities for completing work as
scheduled;
7.e. perform accounting procedures
using manual and automated methods;
7.g. demonstrate use of the numeric
keypad by touch
This lesson, as published, correlates to
the following TEKS. Any
changes/alterations to the activities may
result in the elimination of any or all of
the TEKS listed.
130.166.C
4.c. – journalize and post entries to
establish and replenish petty cash;
TAKS Correlation:
MATH
Objective 10: The student will demonstrate an understanding of the mathematical
processes and tools used in problem solving.
Materials, Equipment and Resources:

Textbook
Teaching Strategies:



Observation
Demonstration
Verbal Drill
Activity 7.2.4 – Proving Petty Cash
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1
Activity Outline:
1. Review the transaction to establish a petty cash fund.
2. Demonstrate the analysis of journalizing cash payments to replenish petty
cash funds. Explain the Cash Short and Over account using a “T” account to
demonstrate the increase side for cash over and for cash short.
3. Have students prepare a Petty Cash Report spreadsheet for these
replenishing transactions:

Replenished petty cash $53.00 for cash paid out: Supplies $23.00,
Miscellaneous Expense, $30.00 with a beginning petty cash balance of
$100.00 and cash on hand of $47.00.

Replenished petty cash $75.00. Cash paid out: Supplies $50.00, Repair
Expense, $20.00 with a beginning petty cash balance of $200.00 and the
actual count of cash $125.00.

Replenished petty cash $76.00. Cash paid out: Miscellaneous Expense
$78.00 with a beginning petty cash balance of $100.00 and the actual
count of cash $24.00.
4. Demonstrate journal entries for the above transactions. Have students
journalize the above transactions using an input form and computerized
accounting software.
Transaction
1
2
3
Debits
Supplies $23.00
Miscellaneous Expense
$30.00
Supplies $50.00
Repair Expense $20.00
Cash Short and Over $5.00
Miscellaneous Expense
$78.00
Credits
Cash $53.00
Cash $75.00
Cash $76.00
Cash Short and
Over $2.00
Assessment:


Observation
Graded Assignment
Quality Feature
Participates in class discussion
Appropriately answers verbal drills
Journal input forms and computer entries accurate
Completes in a timely manner
Activity 7.2.4 – Proving Petty Cash
Score
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING 1