LESSON 9-1
Journalizing
Purchases Using a
Purchases Journal
2
New Vocabulary
 Merchandise: Goods that a business
purchases to sell
 Merchandising business: A business that
purchases and sells goods
 Retail business: A merchandising business
that sells to those who use or consume the
goods
 Wholesale merchandising business: A
business that buys and resells merchandise
to retail merchandising businesses
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New Vocabulary
Corporation: An organization with the
legal rights of a person and which many
persons may own
Share of stock: Each unit of ownership
in a corporation
Capital stock: Total shares of ownership
in a corporation
Stockholder: An owner of one or more
shares of a corporation
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New Vocabulary
 Special journal: A journal used to record only
one kind of transaction
 Cost of merchandise: The price a business
pays for goods it purchases to sell
 Markup: The amount added to the cost of
merchandise to establish the selling price
 Vendor: A business from which merchandise
is purchased or supplies are others assets
are bought
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New Vocabulary
 Purchase on account: A transaction in which
the merchandise purchased is to be paid for
later
 Purchases Journal: A special journal used to
record only purchases of merchandise on
account
 Special amount column: a Journal amount
column headed with an account title
 Purchase invoice: An invoice used as a
source document for recording a purchase on
account transaction
Chapter 9
6
PURCHASING MERCHANDISE
page 236
Chapter 9
7
PURCHASES ON ACCOUNT
page 236
Chapter 9
8
PURCHASES JOURNAL
page 237
Chapter 9
9
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.
Chapter 9
10
PURCHASING MERCHANDISE
ON ACCOUNT
page 239
November 2. Purchased merchandise on account from Crown
Distributing, $2,039.00. Purchase Invoice No. 83.
2
1
3
4
Chapter 9
TOTALING AND RULING A
PURCHASES JOURNAL
11
page 240
1
3
4
5
2
6
Chapter 9
12
Audit Your Understanding
What kinds of transactions are recorded in a purchases journal?
 Purchases of merchandise on account
For what are special amount columns in a journal used?
 Frequently occurring transactions
Why are there two account titles in the amount column of the
purchases journal?
 Because the same two accounts are always affected by
purchase on account transactions
What is the advantage of having special amount columns in a
journal?
 Time is saved because it eliminates writing the account title
Chapter 9
13
Work Together & OYO
P. 241
Chapter 9
LESSON 9-2
Journalizing Cash
Payments Using a Cash
Payments Journal
15
CASH PAYMENTS JOURNAL
page 242
Cash Payments Journal: A special journal used to record only
cash payment transactions
Chapter 9
16
CASH PAYMENT OF AN
EXPENSE
page 243
November 2. Paid cash for advertising, $150.00. Check No. 292.
1
2
3
4
5
Chapter 9
17
BUYING SUPPLIES FOR CASH
page 243
November 5. Paid cash for office supplies, $94.00. Check No. 293.
Chapter 9
CASH PAYMENTS FOR
PURCHASES
18
page 244
November 7. Purchased merchandise for cash, $600.00. Check
No. 301.
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19
New Vocabulary
Cash Discount: A deduction that a
vendor allows on the invoice amount to
encourage prompt payment
Purchases Discount: A cash discount
on purchases taken for paying early
General amount column: A journal
amount column not headed with an
account title
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New Vocabulary
List price: The retail price listed in the
catalog or on an Internet site
Trade discount: A reduction in the list
price granted to customers
Contra account: An account that
reduces a related account on a financial
statement
Chapter 9
21
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.
Chapter 9
22
CASH PAYMENTS ON ACCOUNT
WITH NO PURCHASES DISCOUNTS
page 246
November 13. Paid cash on account to American Paint, $2,650.00,
covering Purchase Invoice No. 77. Check No. 303.
Chapter 9
23
Audit Your Understanding
Why would a vendor offer a cash discount
to a customer?
To encourage early payment
What is recorded in the general amount
columns of the cash payments journal?
Cash payment transactions that do not
occur often
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Audit Your Understanding
What is the difference between purchasing
merchandise and buying supplies?
 A business purchases merchandise to sell but
buys supplies for use in the business. Supplies
are not intended for sale.
What is meant by the terms of sale 2/10, n/30?
 Two ten means that 2% of the invoice amount
may be deducted if the invoice is paid within 10
days of the invoice date. Net 30 means the total
invoiced amount must be paid within 30 days.
Chapter 9
25
Work Together & OYO
P. 247
Chapter 9
LESSON 9-3
Performing Additional
Cash Payments Journal
Operations
27
New Vocabulary
Cash short: A petty cash on hand
amount that is less than the recorded
amount
Cash over: A petty cash on hand
amount that is more than a recorded
amount
Cash Short and Over Account
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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.
page 248
2
4
6
7
8
Chapter 9
REPLENISHING A PETTY CASH
FUND
29
page 249
1.
2.
3.
4.
5.
Date
Account titles
Check number
Expense amounts
Cash short as a debit;
cash over as a credit
6. Total cash payment
4
5
6
1
2
3
Chapter 9
TOTALING, PROVING, AND RULING A
CASH PAYMENTS JOURNAL PAGE TO
CARRY TOTALS FORWARD
30
page 250
Chapter 9
STARTING A NEW CASH
PAYMENTS JOURNAL PAGE
31
page 251
Chapter 9
TOTALING, PROVING, AND RULING A CASH
PAYMENTS JOURNAL AT THE END OF A
MONTH
32
page 252
Chapter 9
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Audit Your Understanding
When journalizing a cash payment to replenish
petty cash, what is entered in the account title
column of the cash payments journal?
 The titles of the account for which the petty cash
fund was used. Example: Supplies, Misc.
Expense, etc.
What is the usual balance of the account cash
short and over?
 The balance is usually a debit because the petty
cash fund is more likely to be short than over
Chapter 9
34
Work Together & OYO
P. 253
Chapter 9
LESSON 9-4
Journalizing Other Transactions
Using a General Journal
36
New Vocabulary
 Purchases returned: Credit allowed for the purchase
price of returned merchandise, resulting in a
decrease in the customer’s accounts payable
 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
 Debit memorandum: A form prepared by the
customer showing the price deduction taken by the
customer for returns and allowances
Chapter 9
MEMORANDUM FOR BUYING
SUPPLIES ON ACCOUNT
37
page 254
Chapter 9
BUYING SUPPLIES ON
ACCOUNT
38
page 255
November 6. Bought store supplies on account from Gulf Craft
Supply, $210.00. Memorandum No. 52.
Chapter 9
39
DEBIT MEMORANDUM FOR PURCHASES
page 256
RETURNS AND ALLOWANCES
Chapter 9
JOURNALIZING PURCHASES
RETURNS AND ALLOWANCES
40
page 257
November 28. Returned merchandise to Crown Distributing, $252.00,
covering Purchase Invoice No. 80. Debit Memorandum No. 78.
Chapter 9
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Audit Your Understanding
What journal is used to record transactions that
cannot be recorded in special journals?
 General journal
Why is a memorandum used as the source
document when supplies are bought on
account?
 To specify that the invoice is for store
supplies and not for purchases, ensuring that
no mistake is made when journalizing the
transaction.
Chapter 9
42
Work Together & OYO
P. 258
Chapter 9
43
Today’s Chuckle
Mr. and Mrs. Fenton are retired,
and Mrs. Fenton insists her
husband go with her to WalMart. He gets so bored with all
the shopping trips. He prefers to
get in and get out, but Mrs.
Fenton loves to browse. One
day Mrs. Fenton gets this letter
from Wal-Mart:
Chapter 9
44
 Dear Mrs. Fenton,
Over the past six months, your husband has been
causing quite a commotion in our store. We cannot
tolerate this behavior and may ban both of you from
our stores. We have documented all incidents on our
video surveillance equipment. The complaints against
Mr. Fenton are listed below:
 Things Mr. Bill Fenton has done while his spouse
was shopping in Wal-Mart:
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1. June 15: Took 24 boxes of condoms and
randomly put them in people's cart when they
weren't looking.
2. July 2: Set all the alarm clocks in House wares
to go off at 5-minute intervals.
3. July 7: Made a trail of tomato juice on the floor
leading to the ladies rest rooms.
4. July 19: Walked up to an employee and told
her, in an official tone, 'Code 3' in house wares.
. . . . and watched what happened.
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 August 4: Went to the Service Desk and asked to put a bag of
M&M's on layaway.
 September 14: Moved a 'CAUTION - WET FLOOR' sign to a
carpeted area.
 September 15: Set up a tent in the camping department and
told other shoppers he'd invite them in if they'll bring pillows
from the bedding department.
 September 23: When a clerk asks if they can help him, he
begins to cry and asks, 'Why can't you people just leave me
alone?'
 October 4: Looked right into the security camera; used it as a
mirror, and picked his nose.
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 November 10: While handling guns in the hunting
department, asked the clerk if he knows where the
antidepressants are.
 December 3: Darted around the store suspiciously
loudly humming the "Mission Impossible" theme.
 December 6: In the auto department, practiced his
"Madonna look" using different size funnels.
 December 18: Hid in a clothing rack and when
people browse through, yelled "PICK ME!" "PICK
ME!"
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December 21: When an announcement
came over the loud speaker, he assumes
the fetal position and screams "NO! NO!
It's those voices again!!!!"
And last, but not least—December 23:
Went into a fitting room, shut the door,
waited awhile, and then yelled very
loudly, "There is no toilet paper in here!"
Chapter 9
49
The End
Chapter 9