Accounting
Journalizing Purchases and Cash
Payments
March 2015
Today in Accounting
• Please use the first 15 minutes of class to update
your Budget Challenge
– Pay bills, quiz completion and update your
spreadsheet.
• We will start Chapter 9 with Terms Review
– Please look up the definitions of the terms on the
handout
– Complete the Office Max activity in the book
– We will learn about the Purchases Journal
– We will complete 9.1 together. You will complete 9.1
Application on your own
LESSON 9-1
Journalizing Purchases Using a
Purchases Journal
Real World Accounting
• Read the OfficeMax Article and answer the
two questions that follow.
Real World Accounting
• Answer: Some of the costs of manufacturing
an item are the same, regardless of the
number of items manufactured. By
purchasing larger quantities of an item, the
unit cost of manufacturing the item may be
reduced. A large company like Boise can
influence the manufacture to pass along those
savings.
Internet Activity
Research the three types of corporations and
answer the three questions that follow.
Chapter 9.1 Vocabulary
• merchandise
• merchandising business
• retail merchandising
business
• wholesale merchandising
business
• corporation
• share of stock
• capital stock
• stockholder
7
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•
•
•
•
•
•
•
•
LESSON 9-1
special journal
cost of merchandise
markup
vendor
purchase on account
purchases journal
special amount column
purchase invoice
terms of sale
page 241
Chapter 9.1
• merchandise
• merchandising business
• retail merchandising
business
• wholesale merchandising
business
• corporation
• share of stock
• capital stock
• stockholder
8
LESSON 9-1
Chapter 9.1
•
•
•
•
•
•
•
•
•
9
LESSON 9-1
special journal
cost of merchandise
markup
vendor
purchase on account
purchases journal
special amount column
purchase invoice
terms of sale
The Business-Hobby Shack, INC.
• Hobby Shack, Inc. is the business that will be
used to illustrate all the chapters in Part 2 of
this class.
Question
• Why would a business organize as a
corporation?
– Answer: Because two or more owners can provide
the capital required to operate the business.
Question #2
• Can you identify a significant difference
between a proprietorship and a corporation?
– Answer: A corporation exists independent of its
owners.
Agenda
• Introduce Chapter 9.1 and 9.2 (Journalizing
Purchases and Cash Payments)
• Start by completing Vocab sheet using the book
• Review the accounts debited and credited for
Purchases and steps to record in Purchases
Journal
• Work Together (we will complete this together!)
& On Your Own + Application problem (Aplia)
• Wrap Up (Next UP)
There are many types of journals…
• A business with a limited number of daily
transactions may record all entries in one
journal.
• A business with many daily transactions may
choose a separate journal for each kind of
transaction.
Special Journal
• A journal used to record only one kind of
transaction.
• Hobby Shack uses five journals to record daily
transactions.
Using Special Journals
• 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
• Businesses add markups to the cost of
merchandise to establish selling prices.
• Markups must cover all expenses of the
business plus enough to earn a net income
• If the mark up is too high, sales might be lost
to competitors with a lower price.
PURCHASING MERCHANDISE
•
•
•
•
It is a cost account and reduces capital.
It has a normal debit balance
Purchases account increases by a debit
Decreases by a credit.
18
LESSON 9-1
page 236
PURCHASES JOURNAL
page 237
A special journal used to record
only purchases of merchandise
on account.
19
LESSON 9-1
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.
20
LESSON 9-1
PURCHASING MERCHANDISE ON
ACCOUNT
page 239
November 2. Purchased merchandise on account from Crown
Distributing, $2,039.00. Purchase Invoice No. 83.
2
1
1.
2.
3.
4.
21
3
Write the date.
Write the vendor name.
Write the purchase invoice number.
Write the amount of the invoice.
LESSON 9-1
4
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.
22
4. Add the amount column.
5. Write the total.
6. Rule double lines across
the amount column.
LESSON 9-1
6
TERMS REVIEW
merchandise
merchandising business
retail merchandising business
wholesale merchandising
business
corporation
share of stock
capital stock
stockholder
23
•
•
•
•
•
•
•
•
•
LESSON 9-1
special journal
cost of merchandise
markup
vendor
purchase on account
purchases journal
special amount column
purchase invoice
terms of sale
page 241
Accounting-Chapter 9-2
Journalizing Cash Payments Using a
Cash Payments Journal
FEBRUARY 25, 2014
Previously…
• Reviewed accounting terms related to purchases
for a merchandising business
– Created our own definition and pictures
– 100,000 Pyramid (You All LOVED It)
• Learned about the different types of corporations
– LLCs
– C corporations
– S corporations
• Journalized purchases and Cash Payments (9.1)
Please Answer
– Please record your answer on WORD and print out.
• You work part time in a local sports equipment store.
As part of your duties, you record daily transactions in
a journal. One day you ask the owner, “You use the
purchase invoice as your source document for
recording purchases of merchandise on account. You
use a Memo as your source document for recording
the entry when supplies are bought on account. Why
don’t you use the invoice for both entries”?
• How would YOU respond to this question?
OBJECTIVES 9.2
• Define Accounting terms related to cash
payments for a merchandising business
• Identify account concepts and practices
related to cash payments for a merchandising
business
• Journalize cash payments and cash discounts
using a cash payments journal.
Cash Payments
• Every Cash Payment, no matter what the
payment is for, is recorded in the cash
payments journal.
Question:
What is the difference between a general
amount column and a special amount
column?
General Amount v. Special Amount
Column
• General Amount Column:
– Not headed with an Account title.
• Special Amount Column:
– Headed with an Account title
GENERAL
SPECIAL
NO TITLE
TITLE
General Amount v. Special Amount
Column
• Question for YOU!
– What is recorded in the general amount columns
of the cash payments journal?
• Answer: Cash Payment transactions that
do not occur often.
GENERAL
SPECIAL
NO TITLE
TITLE
Think about this….
• Why would a vendor offer a cash
discount to a customer?
Answer: To
encourage early
payment
CASH PAYMENTS JOURNAL
page 242
Cash Discount-Deduction that a vendor allows
on the invoice amount to encourage prompt
payment
Purchases Discount-Cash discount on purchases
taken by a customer. (notice the column on the
worksheet)
32
LESSON 9-2
Cash Payment of an Expense
• A cash payment of an expense results in an
increase in the expense and a decrease in cash
– Expense is debited and Cash is credited.
Example: Hobby Shack-Pays for an expense at the
time the transaction occurs…Lets take a look!
CASH PAYMENT OF AN EXPENSE
•The cash payment increases the advertising expense
account balance and decreases the cash account
balance.
•The expense account Advertising Expense has a normal
debit balance and increases by a debit of $150.00.
•The asset account Cash also has a normal debit balance
and decreases by a credit of $150.00
CASH PAYMENT OF AN EXPENSE
page 243
November 2. Paid cash for advertising, $150.00. Check No. 292.
1
1.
2.
3.
4.
5.
2
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
3
4
5
•The cash payment increases the advertising expense
account balance and decreases the cash account
balance.
BUYING SUPPLIES FOR CASH
page 243
November 5. Paid cash for office supplies, $94.00. Check No. 293.
1
1.
2.
3.
4.
5.
2
3
4
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
LESSON 9-2
5
Question
What is the
difference
between
purchasing
merchandise
and buying
supplies?
Answer: A business
purchases merchandise
to sell but buys supplies
for use in the business.
Supplies are not
intended for sale.
CASH PAYMENTS FOR PURCHASES
page 244
November 7. Purchased merchandise for cash, $600.00. Check
No. 301.
2
1
1.
2.
3.
4.
5.
3
4
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
LESSON 9-2
5
What is Meant by……………
TERMS OF SALE
2/10, n/30
ANSWER:
•2% of the invoice may be deducted if paid
within 10 days.
•Net 30 means that the total invoice amount
must be paid within 30 days
CASH PAYMENTS ON ACCOUNT WITH
PURCHASES DISCOUNTS
page 245
November 8. Paid cash on account to Gulf Craft Supply, $488.04,
covering Purchase Invoice No. 82 for $498.00, less 2% discount,
$9.96. Check No. 302.
5
1
2
4
3
1.
2.
3.
4.
5.
6.
Write the date.
Write the account title of the vendor.
Write the check number.
Write the debit amount.
Write the credit amount.
Write the credit amount.
LESSON 9-2
6
CASH PAYMENTS ON ACCOUNT
WITHOUT PURCHASES DISCOUNTS
November 13. Paid cash on account to American Paint, $2,650.00,
covering Purchase Invoice No. 77. Check No. 303.
1
2
4
3
1.
2.
3.
4.
5.
Write the date.
Write the vendor account title.
Write the check number.
Write the debit amount.
Write the credit amount.
LESSON 9-2
5
page 246
TERMS REVIEW
•
•
•
•
•
•
•
cash payments journal
cash discount
purchases discount
general amount column
list price
trade discount
contra account
LESSON 9-2
Exit Ticket
• Merchandise is purchased for $2,000 on March
5th with terms 2/10,N/30. What is the amount
due on
– March 11 ________
– March 17 ________
• Merchandise with a list price of $3,000 is
purchased on account for $1,800 on May 1.
Terms are 1/15,N/30. How much is due if paid
on May 20th?
Bell Ringer Answer
Answer:
– An invoice for supplies can easily be confused with
one for merchandise
– The distinction between the two is in how the
items are to be used (Example?)
– A memo identifying the items to be used as
supplies helps avoid recording supplies as a
purchase of merchandise.
Performing Additional Cash
Payments Journal Operations
Accounting
February 28, 2014
Bell Ringer
• Describe the kinds of transactions for which a
business typically writes checks?
• Answer: Cash paid for merchandise or
supplies was explained in Chapters 1 & 2
– Buying Assets
– Paying on Account
– Paying Expenses
Objectives
• Prepare a petty cash report and journalize the
reimbursement of the petty cash fund.
• Total, prove, and rule a cash payments journal
and start a new cash journal page.
This lesson…
• Illustrates how to record mistakes made in
working with the cash in a petty cash fund.
• Question: What kind of cash payments should
be made using a petty cash fund?
-Small expenses without writing a check.
Errors are always made…
• These errors cause a difference between the
actual cash on hand and the recorded amount
of cash that should be on hand.
Vocabulary 9.3
• Cash Short-a petty cash on hand amount that
is less than a recorded amount. (p. 248)
• Cash Over-a petty cash on hand amount that
is more than a recorded amount. (p. 248)
• The custodian in the next example prepares a
petty cash report when the petty cash fund is
to be replenished.
PETTY CASH REPORT
1. Write the date and
1
custodian name.
2. Write the fund total.
3. Summarize petty cash
payments.
4. Calculate and write the
3
total payments.
5. Calculate and write the
recorded amount on
hand.
5
6. Write the actual amount of cash on hand.
7. Subtract the actual amount on hand from the
recorded amount on hand and write the amount.
8. Write the total of the replenish amount.
51
LESSON 9-3
page 248
2
4
6
7
8
REPLENISHING A PETTY CASH FUND
• Cash Short as DEBIT
• Cash Over as CREDIT
REPLENISHING A PETTY CASH FUND
page 249
1.
Date
2.
Account titles
3.
Check number
4. Expense amounts
5. Cash short as a
debit; cash over as a
credit
4
5
6
1
2
53
3
LESSON 9-3
6.Total cash payment
Remember
• A journal is proved and ruled whenever a
journal page is filled and always at the end of
the month.
• Why?
– To prove that debits equal credits.
– If they do not equal, the errors must be found and
corrected before any more work is completed (
starting a new cash payments journal page)
TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL
page 250
PAGE TO CARRY TOTALS FORWARD
1
4
2
1.
2.
3.
4.
5.
6.
55
3
5
Rule a single line.
Write the date.
Write the words Carried Forward in the Account Title column.
Place a check mark in the Post. Ref. column.
Write each column total.
Rule double lines.
LESSON 9-3
6
STARTING A NEW CASH PAYMENTS
JOURNAL PAGE
page 251
1
2
1.
2.
3.
4.
5.
56
3
4
5
Write the journal page number.
Write the date.
Write the words Brought Forward in the Account Title column.
Place a check mark in the Post. Ref. column.
Record the column totals.
LESSON 9-3
TOTALING, PROVING, AND RULING A CASH PAYMENTS
JOURNAL AT THE END OF A MONTH
page 252
1
2
3
1.
2.
3.
4.
5.
57
4
Rule a single line.
Write the date.
Write the word Totals in the Account Title column.
Write each column total.
Rule double lines.
LESSON 9-3
5
TERMS REVIEW
• cash short
• cash over
58
LESSON 9-3
page 253
Exit Ticket
• Briefly summarize the procedure for preparing
a petty cash report?
• What is the usual balance of the account Cash
Short and Over?
• List the five steps for ruling a cash payments
journal at the end of the month.
LESSON 9-4
Journalizing Other Transactions Using
a General Journal
Tuesday February 28, 2012
Accounting
Today’s Objective
• Journalize purchases returns and allowances
and other transactions using a general journal
Here we go!
• Companies frequently buy items other than
merchandise on account, such as supplies or
equipment.
• These transactions require a credit to
accounts payable to record the liability
9.4 Vocabulary
• Purchases Return-credit allowed for the purchase
price of returned merchandise, resulting in a
decrease in the customer’s accounts payable. (p.
256)
• Purchases allowance-credit allowed for part of
the purchase price of merchandise that is not
returned, resulting in a decrease in the
customer’s accounts payable. (p. 256)-(Damaged
but still usable- reduced price)
9.4 Vocabulary
• Debit memorandum-a form prepared by the
customer showing the price deduction taken
by the customer for returns and allowances.
(p. 256)
Review….
• Remember that a memo is used for special
messages within a company.
• In the illustration you are about to see, the
memo ensures that the invoice received for
supplies brought is NOT recorded as a
purchase of merchandise on account.
MEMORANDUM FOR BUYING
SUPPLIES ON ACCOUNT
66
LESSON 9-4
page 254
Question for YOU!
• Should office supplies purchased by an office
supplies company to sell to its customers be
recorded as a merchandise purchase?
• Should office supplies bought by the same
company for use by employees be recorded
the same way?
– NO, it should be recorded as office supplies or
store supplies.
Buying Supplies on Account
• Increase in supplies and an increase in
accounts payable;
• What is Debited and Credited?
– Supplies is debited and Accounts Payable is
credited.
Buying Supplies on Account
• You will see a diagonal line in the Post Ref
column. This means that since both the
general ledger account (Acct Payable & the
vendor account) are affected by the credit
part of the entry….this will be explained later.
BUYING SUPPLIES ON ACCOUNT
page 255
November 6. Bought store supplies on account from Gulf Craft
Supply, $210.00. Memorandum No. 52.
2
4
3
7
1
1. Write the date.
2. Write the account title.
3. Write the memorandum
number.
4. Write the debit amount.
70
5
6
5. Write the account title and
vendor name.
6. Place a diagonal line in the
Post. Ref. column.
7. Write the credit amount.
LESSON 9-4
DEBIT MEMORANDUM FOR
PURCHASES RETURNS AND
ALLOWANCES
71
LESSON 9-4
page 256
JOURNALIZING PURCHASES RETURNS
AND ALLOWANCES
page 257
November 28. Returned merchandise to Crown Distributing, $252.00,
covering Purchase Invoice No. 80. Debit Memorandum No. 78.
2
5
1
3
4
6
1. Write the date.
2. Write the account title and
vendor name.
3. Place a diagonal line in the
Post. Ref. column.
72
7
4.
5.
6.
7.
Write debit memorandum number.
Write the amount.
Write Purchases Returns and Allow.
Write the amount.
LESSON 9-4
TERMS REVIEW
• purchases return
• purchases allowance
• debit memorandum
73
LESSON 9-4
page 258
To do list
• Aplia 9.4
• Exit Ticket
• Prepare for Test
– Online Test and Xtra Study Tools on c21accounting
web-site
Exit Ticket
• Why is a memo used as the source document
when supplies are bought on account?
• What is the primary difference between a
purchases return and a purchases allowance?