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Chapter 8: Accounting for Purchases and Accounts Payable
Chapter Opener: Thinking Critically
Students may discuss one or more of the following merchandise selection tools: consumer surveys,
customer requests, or sales history reports.
Fast Facts
• Pier 1 celebrated its 40-year history of retailing in 2002. With the mantra “From Hippie to Hip,” Pier 1
featured year-long special promotions and merchandise to honor the occasion.
• Pier 1 employs nearly 17,000 people worldwide.
• Net sales for the fiscal year 2004 were $1.86 billion.
• In 1970, Pier 1 went public and became listed on the American Stock Exchange.
Accounting on the Job: Thinking Critically
Answers will vary. Store managers are responsible for a wide range of operations and procedures. The
extension of credit, utilizing proprietary credit cards or customer accounts, requires that managers
understand common credit practices so that policies are established within generally accepted parameters.
Managers should also understand how credit policies impact accounts receivable and cash flow.
Accounting on the Job: Internet Application
The Federated Department Stores recruitment Web site (www.federated-fds.com) offers job descriptions for
positions in Store Management, Merchandising, and the Executive Group. The Store Manager is responsible
for all aspects of running a profitable store location. Buyers execute seasonal merchandise plans and pricing
strategies.
Managerial Implications: Thinking Critically
Answers will vary. Students should recognize the need for checks and balances for avoiding theft and waste.
Discussion Questions
These questions are designed to check students’ understanding of the new terms, concepts, and procedures
presented in the chapter.
1. Audit trail.
2. Authorization of purchase, check-in of goods, verification of invoice, proper authorization of payment,
division of labor and tasks, use of prenumbered forms.
3. Documentation of credit issued.
4. Allowance made for damaged merchandise.
5. Documentation of returned merchandise.
6. List of all creditors and the balance owed by each. Prepared so that its total can be proved against the
balance of the Accounts Payable account.
7. The Accounts Payable account is the control account; summarizes the balances of the creditor
accounts.
8. Individual accounts of all creditors.
9. Helps pay bills promptly and maintain a good credit reputation.
10. Add Freight In to Purchases, then deduct Purchases Returns and Allowances.
11. Purchases journal.
12. Purchase invoice denotes incoming merchandise, sales invoice denotes outgoing (sold) merchandise.
13. Debit.
14. Income Statement in the Cost of Goods Sold section.
15. Provides a separate record.
16. a. Net amount of the invoice is due 30 days after the date of the invoice. b. If the invoice is paid within
10 days of its date, a 2 percent discount may be taken; otherwise, the total amount is due in 30 days.
c. The amount of the invoice is due 10 days after the end of the month in which the invoice is issued.
d. Payment in full is due 20 days after date of the invoice. e. If the invoice is paid within 10 days of its
date, a 1% discount may be taken; otherwise the total amount is due in 20 days. f. If payment is made
166 䡲 Chapter 8
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within 5 days of its date, a 3 percent discount may be taken; otherwise the total amount is due in 30
days. g. Payment in full is due 15 days after the end of the month in which the invoice is issued.
17. Not entered in purchases journal; only used for recording merchandise purchased for resale. It should
be recorded in the general journal.
Exercises
Exercise 8.1
1. Purchases Journal
2. General Journal
3. Cash Payments Journal
4. Purchases Journal
5. General Journal
6. Cash Payments Journal
Exercise 8.2
Dr.
1. 501
2. 205
3. 205
4. 501, 502
5. 205
6. 501
Cr.
205
503
101
205
503
101
Exercise 8.3
PURCHASES JOURNAL
Date
2007
July
Purchased From
1
3
5
10
Invoice Inv.
Number Date
Auto Parts Corp.
Aplex Company
The Custom Sounds Shop, Inc.
Specialty Tire Company
6812
441
5601
1102
6/27
6/30
7/1
7/8
PAGE 6
Post.
Ref.
Terms
n/30
1/10, n/60
2/10, n/30
2/10, n/30
Accounts
Payable
Credit
Purchases
Debit
2,078
3,200
2,550
4,250
1,950
3,120
2,450
4,250
Freight
in
Debit
128
80
100
Exercise 8.4
GENERAL JOURNAL
Date
2007
Feb. 9
Description
PAGE 10
Post.
Ref.
Accounts Payable/Discount Appliance Corporation . . . .
Purchases Returns & Allowances . . . . . . . . . . . . . . .
Received CM 244 for damaged merchandise that
was returned; original purchase made on
Inv. 4101, January 3, 2007
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Debit
Credit
3,920
3,920
Chapter 8 䡲 167
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Exercise 8.5
GENERAL JOURNAL
Date
2007
Mar. 17
PAGE
Post.
Ref.
Description
Accounts Payable/Town Appliance Mart . . . . . . . . . . . .
Purchases Returns & Allowances . . . . . . . . . . . . . . .
Received CM 112 for damages merchandise;
original purchase made on Inv. 911,
February 20, 2007
Exercise 8.6
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight In . . . . . . . . . . . . . . . . . . . . . . . . . .
$42,840
2,076
Delivered Cost of Purchases . . . . . . . . . . .
Less Purchases Returns and Allowances .
$44,916
4,890
Net Delivered Cost of Purchases . . . . . . . .
$40,026
Debit
Credit
1,000
1,000
Exercise 8.7
a. The total of the schedule of accounts payable will not equal the balance of the Accounts Payable
controlling account.
b. The total of the schedule of accounts payable will not equal the balance of the Accounts Payable
controlling account.
c. Jackson Company will notify us that their invoice has not been paid.
d. Statements from Jackson Company and Baxton Company will not agree with the balances reflected in
the A/P subsidiary ledger.
Exercise 8.8
a. Purchases, $93,420
b. Purchase Returns & Allowances, $3,250
c. Freight In, $3,680
d. Delivered Cost of Purchases $100,650
168 䡲 Chapter 8
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Problems
Problem 8.1A
PURCHASES JOURNAL
Date
2007
June
Purchased From
1
8
12
20
23
28
Terms
Post.
Ref.
Accounts
Payable
Credit
Purchases
Debit
n/60
n/45
1/10, n/60
n/45
n/45
2/10, n/30
✓
✓
✓
✓
✓
✓
2,175
1,390
906
1,125
1,940
2,590
1,995
1,390
906
1,050
1,940
2,470
120
10,126
9,751
375
Invoice Inv.
Number Date
Jones Company
Camera & Films Products
The Optical Supply Store
Camera & Films Products
Chicago Case Company
Zant Corporation
4241
1102
7282
1148
3108
5027
5/27
6/3
6/9
6/15
6/18
6/24
PAGE 14
30 Totals
(205)
GENERAL JOURNAL
Date
2007
June 18
30
Description
Accounts Payable/Jones Company . . . . . . . . . . . . . . . .
Purchase Returns & Allowances . . . . . . . . . . . . . . . .
Received CM 110 for defective cameras that
were returned; original purchase made on
Inv. 4241, May 27, 2007
Accounts Payable/Chicago Case Company . . . . . . . . .
Purchase Returns & Allowances . . . . . . . . . . . . . . . .
Received CM 1108 for allowance for damaged
merchandise, original purchase made on
Inv. 3108, June 18, 2007
(501)
Freight
in
Debit
180
75
(502)
PAGE 38
Post.
Ref.
Debit
205/✓
503
375
205/✓
503
240
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Credit
375
240
Chapter 8 䡲 169
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GENERAL LEDGER
ACCOUNT
Accounts Payable
Date
2007
June 1
18
30
30
ACCOUNT NO.
Post.
Ref.
Description
✓
J38
J38
P14
Balance
ACCOUNT
Debit
Post.
Ref.
2007
June 30
10,126
Debit
P14
Post.
Ref.
2007
June 30
Debit
P14
Date
9,751
Post.
Ref.
Description
2007
June 18
30
Credit
375
Purchases Returns and Allowances
J38
J38
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight In . . . . . . . . . . . . . . . . . . . . . . . . . .
$9,751
375
Delivered Cost of Purchases . . . . . . . . . . .
Less Purchases Returns & Allowances . . .
$10,126
615
Net Delivered Cost of Purchases . . . . . . . .
$ 9,511
502
Balance
Debit
Credit
375
ACCOUNT NO.
Debit
501
Balance
Debit
Credit
ACCOUNT NO.
Description
ACCOUNT
Credit
9,751
Freight In
Date
13,904
13,529
13,289
23,415
ACCOUNT NO.
Description
ACCOUNT
Balance
Debit
Credit
375
240
Purchases
Date
Credit
205
Credit
503
Balance
Debit
Credit
375
240
375
615
Analyze: Total Purchases in June were $9,751.
Problem 8.2A
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Camera & Films Products
Date
2007
June 1
8
20
Description
Balance
Invoice 1102, 6/3/07
Invoice 1148, 6/15/07
170 䡲 Chapter 8
TERMS
Post.
Ref.
✓
P14
P14
Debit
n/45
Credit
Balance
1,390
1,125
10,480
11,870
12,995
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ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Date
2007
June 1
23
30
NAME
Date
2007
June 1
18
NAME
Date
2007
June 1
12
NAME
Date
2007
June 28
Chicago Case Company
TERMS
Post.
Ref.
Description
✓
P14
J38
Balance
Invoice 3108, 6/18/07
CM 1108
Debit
Credit
Balance
1,940
1,200
3,140
2,900
240
Jones Company
TERMS
Description
Invoice 4241, 5/27/07
CM 110
Post.
Ref.
Debit
P14
J38
375
The Optical Supply Store
n/45
n/60
Credit
Balance
2,175
2,175
1,800
TERMS 1/10, n/60
Post.
Ref.
Description
Debit
✓
P14
Balance
Invoice 7282, 6/9/07
Zant Corporation
Credit
Balance
906
2,224
3,130
TERMS 2/10, n/30
Post.
Ref.
Description
Invoice 5027, 6/24/07
Debit
P14
Credit
Balance
2,590
2,590
PHOTO MART
Schedule of Accounts Payable
June 30, 2007
Camera & Films Products . . . . . . . . . . . . . .
Chicago Case Company . . . . . . . . . . . . . . .
Jones Company . . . . . . . . . . . . . . . . . . . . .
The Optical Supply Store . . . . . . . . . . . . . .
Zant Corporation . . . . . . . . . . . . . . . . . . . . .
12,995
2,900
1,800
3,130
2,590
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,415
Analyze: The balance owed to The Optical Supply Store on June 30 is $3,130.
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Problem 8.3A
PURCHASES JOURNAL
Date
2007
July
Purchased From
1
5
9
19
21
31
Terms
Post.
Ref.
Accounts
Payable
Credit
Purchases
Debit
n/60
n/45
n/30
n/30
1/15, n/60
2/10, n/30
✓
✓
✓
✓
✓
✓
5,220
4,922
950
1,456
3,904
23,440
4,700
4,370
950
1,200
3,680
22,800
256
224
640
39,892
37,700
2,192
Invoice Inv.
Number Date
Brown Corporation
Brooks Garden Furniture Co.
Lawn & Garden Supply
Lawn & Garden Supply
Cameron Rubber Company
Wilson Industrial Products
1011
639
8164
9050
1785
8985
6/26
7/2
7/5
7/15
7/17
7/26
PAGE 8
31
(205)
GENERAL JOURNAL
Date
2007
July 16
28
Freight
in
Debit
520
552
(501)
(502)
PAGE 20
Post.
Ref.
Description
Accounts Payable/Brooks Garden Furniture Company .
Purchases Returns & Allowances . . . . . . . . . . . . . . .
Received CM 110 for allowance for damaged
merchandise; original purchase made on
Inv. 639, July 2
Accounts Payable/Cameron Rubber Company . . . . . . .
Purchases Returns & Allowances . . . . . . . . . . . . . . .
Received CM 223 for damaged merchandise that
was returned; original purchase made on
Inv. 1785, July 17
Debit
205/✓
503
600
205/✓
503
800
Credit
600
800
GENERAL LEDGER
ACCOUNT
Accounts Payable
Date
2007
July 1
16
28
31
Description
Balance
ACCOUNT
ACCOUNT NO.
Post.
Ref.
✓
J20
J20
P8
Debit
2007
July 31
172 䡲 Chapter 8
Description
Balance
Debit
Credit
35,880
35,280
34,480
74,372
600
800
39,892
Purchases
Date
Credit
ACCOUNT NO.
Post.
Ref.
P8
Debit
37,700
Credit
205
501
Balance
Debit
Credit
37,700
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GENERAL LEDGER
ACCOUNT
Date
Freight In
ACCOUNT NO.
Description
2007
July 31
Debit
P8
ACCOUNT
Date
Post.
Ref.
Credit
2,192
2007
July 16
28
Post.
Ref.
Balance
Debit
Credit
2,192
Purchases Returns & Allowances
Description
ACCOUNT NO.
Debit
J20
J20
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight In . . . . . . . . . . . . . . . . . . . . . . . . . .
$37,700
2,192
Delivered Cost of Purchases . . . . . . . . . . .
Less Purchases Returns & Allowances . . .
$39,892
1,400
Net Delivered Cost of Purchases . . . . . . . .
$38,492
502
Credit
503
Balance
Debit
Credit
600
800
600
1,400
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Brooks Garden Furniture Company
Date
Description
2007
July 1
5
16
NAME
Date
2007
July 1
1
NAME
Date
2007
July 21
28
Balance
Invoice 639, 7/2/07
CM 110
TERMS
Post.
Ref.
✓
P8
J20
Debit
Description
Balance
Invoice 1011, 6/26/07
Invoice 1785, 7/17/07
CM 223
Balance
4,922
11,120
16,042
15,442
TERMS
Post.
Ref.
Debit
✓
P8
Cameron Rubber Company
Description
Credit
600
Brown Corporation
n/45
n/60
Credit
Balance
5,220
18,120
23,340
TERMS 1/15, n/60
Post.
Ref.
Debit
P8
J20
800
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Credit
Balance
3,904
3,904
3,104
Chapter 8 䡲 173
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ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Lawn & Garden Supply
Date
TERMS
Post.
Ref.
Description
2007
July 1
9
19
NAME
✓
P8
P8
Balance
Invoice 8164, 7/5/07
Invoice 9050, 7/15/07
Wilson Industrial Products
Date
Credit
Balance
950
1,456
6,640
7,590
9,046
TERMS 2/10, n/30
Post.
Ref.
Description
2007
July 31
Debit
n/30
Invoice 8985, 7/26/07
Debit
P8
Credit
Balance
23,440
23,440
THE PATIO SHOP
Schedule of Accounts Payable
July 31, 2007
Brooks Garden Furniture Company . . . . . .
Brown Corporation . . . . . . . . . . . . . . . . . . .
Cameron Rubber Company . . . . . . . . . . . .
Lawn and Garden Supply . . . . . . . . . . . . . .
Wilson Industrial Products . . . . . . . . . . . . .
15,442
23,340
3,104
9,046
23,440
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,372
Analyze: Total freight charges for the month of July were $2,192.
Problem 8.4A
PURCHASES JOURNAL
Date
2007
Sept.
Purchased From
3
7
16
20
23
30
Dalton Office Furniture Co.
Apex Office Machines, Inc.
Davis Corporation
Apex Office Machines, Inc.
Brown Paper Company
Zenn Furniture, Inc.
30
Invoice Inv.
Number Date
4213
9217
8066
11011
6498
696
8/29
9/2
9/11
9/15
9/18
9/25
PAGE 5
Terms
Post.
Ref.
Accounts
Payable
Credit
Purchases
Debit
n/30
n/60
n/30
n/60
1/10, n/30
2/10, n/30
✓
✓
✓
✓
✓
✓
8,132
11,300
2,680
1,000
7,600
4,000
7,920
11,300
2,556
1,000
7,500
3,840
100
160
34,712
34,116
596
(205)
174 䡲 Chapter 8
(501)
Freight
in
Debit
212
124
(502)
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GENERAL JOURNAL
Date
2007
Sept. 10
28
PAGE 14
Post.
Ref.
Description
Accounts Payable/Dalton Office Furniture Co. . . . . . . .
Purchases Returns & Allowances . . . . . . . . . . . . . . .
Received CM 511 for allowance for damaged
merchandise; original purchase made on
Inv. 4213, August 29
Accounts Payable/Apex Office Machines, Inc. . . . . . . .
Purchases Returns & Allowances . . . . . . . . . . . . . . .
Received CM 312 for damaged merchandise
that was returned; original purchase made on
Inv. 11011, September 15
Debit
205/✓
503
600
205/✓
503
880
Credit
600
880
GENERAL LEDGER
ACCOUNT
Date
2007
Sept. 1
10
28
30
Accounts Payable
Description
Balance
ACCOUNT
Date
Date
Description
Date
2007
Sept. 10
28
✓
J14
J14
P5
Debit
Credit
Post.
Ref.
34,712
Credit
34,116
P5
Debit
Credit
596
Post.
Ref.
J14
J14
Balance
Debit
Credit
ACCOUNT NO.
Debit
502
596
Purchases Returns and Allowances
Description
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
501
34,116
Freight In
Description
28,256
27,656
26,776
61,488
600
880
Debit
205
Balance
Debit
Credit
ACCOUNT NO.
P5
2007
Sept. 30
ACCOUNT
Post.
Ref.
Purchases
2007
Sept. 30
ACCOUNT
ACCOUNT NO.
Credit
600
880
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
503
Balance
Debit
Credit
600
1,480
Chapter 8 䡲 175
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Net Delivered Cost of Purchases
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight in . . . . . . . . . . . . . . . . . . . . . . . . . . .
$34,116
596
Delivered Cost of Purchases . . . . . . . . . . .
Less Purchase Returns & Allowances . . . .
$34,712
1,480
Net Delivered Cost of Purchases . . . . . . . .
$33,232
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Apex Office Machines, Inc.
Date
2007
Sept. 1
7
20
28
NAME
Description
NAME
NAME
Description
NAME
Debit
Invoice 8066, 9/11/07
Post.
Ref.
Debit
Credit
Balance
7,600
2,120
9,720
Post.
Ref.
Debit
P5
n/30
Credit
Balance
8,132
9,576
17,708
17,108
600
Zenn Furniture, Inc.
n/30
Credit
Balance
2,680
2,680
TERMS 2/10, n/30
Description
176 䡲 Chapter 8
10,960
22,260
23,260
22,380
TERMS
Description
Balance
Invoice 696, 9/25/07
11,300
1,000
TERMS
Davis Corporation
Date
2007
Sept. 1
30
Post.
Ref.
✓
P5
J14
Balance
Invoice 4213, 8/29/07
CM 511
Balance
TERMS 1/10, n/30
Dalton Office Furniture Company
Description
n/60
Credit
880
✓
P5
Balance
Invoice 6498, 9/18/07
Date
2007
Sept. 16
Debit
Brown Paper Company
Date
2007
Sept. 1
3
10
Post.
Ref.
✓
P5
P5
J14
Balance
Invoice 9217, 9/2/07
Invoice 11011, 9/15/07
CM 312
Date
2007
Sept. 1
23
TERMS
Post.
Ref.
✓
P5
Debit
Credit
Balance
4,000
5,600
9,600
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PROFESSIONAL OFFICE PRODUCTS CENTER
Schedule of Accounts Payable
September 30, 2007
Apex Office Machines, Inc. . . . . . . . . . . . . .
Brown Paper Company . . . . . . . . . . . . . . .
Dalton Office Furniture Company . . . . . . . .
Davis Corporation . . . . . . . . . . . . . . . . . . . .
Zenn Furniture, Inc. . . . . . . . . . . . . . . . . . .
22,380
9,720
17,108
2,680
9,600
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61,488
Analyze: Total purchases returns and allowances for September were $1,480. This represents 4.34% of the
total purchases ($1,480/$34,116).
Problem 8.1B
PURCHASES JOURNAL
Date
2007
May
1
8
12
16
22
31
Terms
Post.
Ref.
Accounts
Payable
Credit
Purchases
Debit
n/45
n/30
n/60
n/30
1/10, n/60
2/10, n/30
✓
✓
✓
✓
✓
✓
6,820
11,100
5,000
3,160
2,240
3,400
6,600
11,100
5,000
3,160
2,240
3,300
100
31,720
31,400
320
Invoice Inv.
Number Date
Purchased From
Colorado Shop for Skiers
Alaska Supply Company
Barrons Winter Fashions
Alaska Supply Company
Cold Mountain Clothing Company
Taylor Ski Goods
6572
4916
986
5011
4019
8354
4/28
5/2
5/11
5/15
5/16
5/27
PAGE 15
31
(205)
GENERAL JOURNAL
Date
2007
May 9
28
Description
Accounts Payable/Colorado Shop for Skiers . . . . . . . . .
Purchases Returns and Allowances . . . . . . . . . . . . . .
Received Credit Memo 155 for damaged ski boots
that were returned; original sale made on
Inv. 6572, April 28, 2007
Accounts Payable/Alaska Supply Company . . . . . . . . .
Purchases Returns and Allowances . . . . . . . . . . . . . .
Received Credit Memo 38 for defective ski poles
that were returned; original purchase made on
Inv. 5011, May 15, 2007
Freight
in
Debit
220
(501)
(502)
PAGE 38
Post.
Ref.
Debit
205/✓
503
1,600
205/✓
503
420
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Credit
1,600
420
Chapter 8 䡲 177
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Page 178
GENERAL LEDGER
ACCOUNT
Accounts Payable
Date
2007
May 1
9
28
31
ACCOUNT NO.
Post.
Ref.
Description
✓
J38
J38
J15
Balance
ACCOUNT
Post.
Ref.
2007
May 31
Debit
Credit
31,400
Freight In
Post.
Ref.
Debit
P15
31,400
Post.
Ref.
Description
2007
May 9
28
Credit
320
Purchases Returns and Allowances
J38
J38
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight In . . . . . . . . . . . . . . . . . . . . . . . . . .
$31,400
320
Delivered Cost of Purchases . . . . . . . . . . .
Less Purchases Returns and Allowances .
$31,720
2,020
Net Delivered Cost of Purchases . . . . . . . .
$29,700
502
Balance
Debit
Credit
320
ACCOUNT NO.
Debit
501
Balance
Debit
Credit
ACCOUNT NO.
Description
Date
21,608
20,008
19,588
51,308
31,720
P15
2007
May 31
ACCOUNT
Balance
Debit
Credit
ACCOUNT NO.
Description
Date
Credit
1,600
420
Purchases
Date
ACCOUNT
Debit
205
Credit
1,600
420
503
Balance
Debit
Credit
1,600
2,020
Analyze: Total accounts payable of $31,720 was posted from the purchases journal to the general ledger for
May.
178 䡲 Chapter 8
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Page 179
Problem 8.2B
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Date
2007
May 1
8
16
28
NAME
Date
2007
May 1
12
NAME
Date
2007
May 1
22
NAME
Date
2007
May 1
1
9
NAME
Date
2007
May 31
Alaska Supply Company
Description
Balance
Invoice 4916, 5/2/07
Invoice 5011, 5/15/07
CM 38
TERMS
Post.
Ref.
✓
P15
P15
J38
Debit
Description
Balance
Invoice 986, 5/11/07
Balance
Invoice 4019, 5/16/07
Post.
Ref.
Debit
✓
P15
Balance
Invoice 6572, 4/28/07
CM 155
Post.
Ref.
Debit
✓
P15
Invoice 8354, 5/27/07
1,700
12,800
15,960
15,540
n/60
Credit
Balance
5,000
8,720
13,720
Credit
Balance
2,240
5,000
7,240
TERMS
Post.
Ref.
✓
P15
J38
Debit
n/45
Credit
Balance
6,820
6,188
13,008
11,408
1,600
Taylor Ski Goods
Description
11,100
3,160
TERMS 1/10, n/60
Colorado Shop for Skiers
Description
Balance
TERMS
Cold Mountain Clothing Company
Description
Credit
420
Barrons Winter Fashions, Inc.
n/30
TERMS 2/10, n/30
Post.
Ref.
Debit
P15
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Credit
Balance
3,400
3,400
Chapter 8 䡲 179
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Page 180
DENVER SKI SHOP
Schedule of Accounts Payable
May 31, 2007
Alaska Supply Company . . . . . . . . . . . . . .
Barrons Winter Fashions, Inc. . . . . . . . . . .
Cold Mountain Clothing Company . . . . . . .
Colorado Shop for Skiers . . . . . . . . . . . . . .
Taylor Ski Goods . . . . . . . . . . . . . . . . . . . .
15,540
13,720
7,240
11,408
3,400
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,308
Analyze: Denver Ski Shop owed Colorado Shop for Skiers $11,408 on May 31.
Problem 8.3B
PURCHASES JOURNAL
Date
2007
Dec.
Purchased From
1
5
9
19
21
31
Terms
Post.
Ref.
Accounts
Payable
Credit
Purchases
Debit
n/45
1/15, n/60
n/30
n/30
n/60
2/10, n/30
✓
✓
✓
✓
✓
✓
5,936
5,800
1,148
1,756
836
3,780
5,780
5,700
1,148
1,600
760
3,700
156
76
80
19,256
18,688
568
Invoice Inv.
Number Date
Selby Corporation
Patio Furniture Shop
Spring Lawn Center
Spring Lawn Center
Delta Rubber Company
Cason Industries
2110
633
1127
5731
8517
8819
11/26
12/2
12/4
12/15
12/17
12/26
PAGE 8
31
(205)
GENERAL JOURNAL
Date
2007
Dec. 16
28
Description
Accounts Payable/Patio Furniture Shop . . . . . . . . . . . .
Purchases Returns and Allowances . . . . . . . . . . . . . .
Received Credit Memo 101 for allowance for
damaged merchandise; original purchase made
on Inv. 633, Dec. 2
Accounts Payable/Delta Rubber Company . . . . . . . . . .
Purchases Returns and Allowances . . . . . . . . . . . . . .
Received Credit Memo 210 for damaged
merchandise that was returned; original
purchase made on Inv. 8517, Dec. 17
180 䡲 Chapter 8
Freight
in
Debit
156
100
(501)
(502)
PAGE 20
Post.
Ref.
Debit
205/✓
503
400
205/✓
503
150
Credit
400
150
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Page 181
GENERAL LEDGER
ACCOUNT
Date
2007
Dec. 1
16
28
31
Accounts Payable
Description
Balance
ACCOUNT
Date
Date
Description
Date
Debit
✓
J20
J20
P8
Credit
19,256
Debit
Credit
18,688
Debit
P8
Credit
568
2007
Dec. 16
28
Post.
Ref.
Balance
Debit
Credit
ACCOUNT NO.
Debit
J20
J20
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight In . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,688
568
Delivered Cost of Purchases . . . . . . . . . . .
Less Purchases Returns and Allowances .
$19,256
550
Net Delivered Cost of Purchases . . . . . . . .
$18,706
502
568
Purchases Returns and Allowances
Description
Balance
Debit
Credit
ACCOUNT NO.
Post.
Ref.
501
18,688
Freight In
Description
13,490
13,090
12,940
32,196
ACCOUNT NO.
Post.
Ref.
205
Balance
Debit
Credit
400
150
P8
2007
Dec. 31
ACCOUNT
Post.
Ref.
Purchases
2007
Dec. 31
ACCOUNT
ACCOUNT NO.
Credit
400
150
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
503
Balance
Debit
Credit
400
550
Chapter 8 䡲 181
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Page 182
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Cason Industries
Date
2007
Dec. 1
31
NAME
Description
NAME
NAME
Description
NAME
2007
Dec. 1
9
19
Post.
Ref.
Debit
Invoice 633, 12/2/07
CM 101
Post.
Ref.
Debit
P8
J20
400
Selby Corporation
2,150
5,930
n/60
Credit
Balance
836
3,850
4,686
4,536
Credit
Balance
5,800
5,800
5,400
TERMS
Description
Post.
Ref.
Debit
✓
P8
Balance
Invoice 2110, 11/26/07
Spring Lawn Center
Post.
Ref.
✓
P8
P8
Debit
n/45
Credit
Balance
5,936
4,842
10,778
TERMS
Description
182 䡲 Chapter 8
3,780
TERMS 1/15, n/60
Description
Balance
Invoice 1127, 12/4/07
Invoice 5731, 12/15/07
Balance
150
Patio Furniture Shop
Date
Credit
TERMS
✓
P8
J20
Balance
Invoice 8517, 12/17/07
CM 210
Date
2007
Dec. 1
1
Debit
Delta Rubber Company
Date
2007
Dec. 5
16
Post.
Ref.
✓
P8
Balance
Invoice 8819, 12/26/07
Date
2007
Dec. 1
21
28
TERMS 2/10, n/30
n/30
Credit
Balance
1,148
1,756
2,648
3,796
5,552
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Page 183
LANDSCAPE SUPPLY CENTER
Schedule of Accounts Payable
December 31, 2007
Cason Industries . . . . . . . . . . . . . . . . . . . . .
Delta Rubber Company . . . . . . . . . . . . . . .
Patio Furniture Shop . . . . . . . . . . . . . . . . . .
Selby Corporation . . . . . . . . . . . . . . . . . . . .
Spring Lawn Center . . . . . . . . . . . . . . . . . .
5,930
4,536
5,400
10,778
5,552
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,196
Analyze: Accounts Payable increased by $18,706 during the month of December.
Problem 8.4B
PURCHASES JOURNAL
Date
2007
Feb.
Purchased From
5
8
12
13
19
21
Terms
Post.
Ref.
Accounts
Payable
Credit
Purchases
Debit
2/10, n/30
2/10, n/30
2/10, n/30
1/10, n/45
n/30
1/10, n/45
✓
✓
✓
✓
✓
✓
2,100
1,900
1,200
1,100
2,040
3,710
2,000
1,900
1,200
1,100
1,980
3,600
100
12,050
11,780
270
Invoice Inv.
Number Date
Packing & Mailing Supply Center, Inc.
Gifts & Holiday Cards
Gifts & Holiday Cards
Specialty Business Cards
Business Forms, Inc.
Specialty Business Cards
502
2808
2904
2013
2019
1376
2/2
2/5
2/8
2/9
2/16
2/19
PAGE 4
28
(203)
GENERAL JOURNAL
Date
2007
Feb. 20
27
Description
Accounts Payable/Gift & Holiday Cards . . . . . . . . . . . . .
Purchases Returns and Allowances . . . . . . . . . . . . . .
Received Credit Memo 102 for damaged
merchandise; original purchase made on Inv.
2808, dated February 5
Accounts Payable/Gift & Holiday Cards . . . . . . . . . . . . .
Purchases Returns and Allowances . . . . . . . . . . . . . .
Received Credit Memo 118 for damaged
merchandise; original purchase made on Inv.
2904, February 12
Freight
in
Debit
60
110
(501)
(502)
PAGE 12
Post.
Ref.
Debit
203/✓
503
200
203/✓
503
240
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Credit
200
240
Chapter 8 䡲 183
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Page 184
GENERAL LEDGER
ACCOUNT
Accounts Payable
Date
2007
Feb. 1
20
27
28
ACCOUNT NO.
Post.
Ref.
Description
✓
J12
J12
P4
Balance
ACCOUNT
Post.
Ref.
2007
Feb. 28
Debit
Post.
Ref.
Debit
P4
11,780
Post.
Ref.
Description
2007
Feb. 20
27
Credit
270
Purchases Returns and Allowances
J12
J12
Net Delivered Cost of Purchases
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight In . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,780
270
Delivered Cost of Purchases . . . . . . . . . . .
Less Purchases Returns and Allowances .
$12,050
440
Net Delivered Cost of Purchases . . . . . . . .
$11,610
502
Balance
Debit
Credit
270
ACCOUNT NO.
Debit
501
Balance
Debit
Credit
ACCOUNT NO.
Description
184 䡲 Chapter 8
Credit
11,780
Freight In
Date
15,200
15,000
14,760
26,810
12,050
P4
2007
Feb. 28
ACCOUNT
Balance
Debit
Credit
ACCOUNT NO.
Description
Date
Credit
200
240
Purchases
Date
ACCOUNT
Debit
203
Credit
200
240
503
Balance
Debit
Credit
200
440
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Page 185
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Business Forms, Inc.
Date
TERMS
Post.
Ref.
Description
2007
Feb. 1
19
NAME
Debit
Gifts & Holiday Cards
Date
NAME
Post.
Ref.
✓
P4
P4
J12
J12
Balance
Invoice 2808, 2/5/07
Invoice 2904, 2/8/07
CM 102
CM 118
Debit
NAME
Debit
✓
P4
Balance
Invoice 502, 2/2/07
Balance
4,000
5,900
7,100
6,900
6,660
Credit
Balance
2,100
3,200
5,300
TERMS 1/10, n/45
Post.
Ref.
Description
2007
Feb. 13
21
Credit
200
240
Specialty Business Cards
Date
8,000
10,040
TERMS 2/10, n/30
Post.
Ref.
Description
2007
Feb. 1
5
2,040
1,900
1,200
Packing & Mailing Supply Center, Inc.
Date
Balance
TERMS 2/10, n/30
Description
2007
Feb. 1
8
12
20
27
Credit
✓
Balance
Invoice 2019, 2/16/07
n/30
Invoice 2013, 2/9/07
Invoice 1376, 2/19/07
Debit
P4
P4
Credit
Balance
1,100
3,710
1,100
4,810
SIMPSON’S CARDS & NOVELTY SHOP
Schedule of Accounts Payable
February 28, 2007
Business Forms, Inc. . . . . . . . . . . . . . . . . .
Gifts & Holiday Cards . . . . . . . . . . . . . . . . .
Packing & Mailing Supply Center, Inc. . . . .
Specialty Business Cards . . . . . . . . . . . . . .
10,040
6,660
5,300
4,810
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,810
Analyze: Total freight charges for the month of February were $270. This represents 2.24% of delivered
cost of purchases.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 8 䡲 185
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Page 186
Challenge Problem
PURCHASES JOURNAL
Date
2007
Jan.
Purchased From
3
5
7
9
12
18
25
29
31
Fashion Center
Handbag Depot
House of Styles, Inc.
Modern Woman Pants &
Suits Company
International Executive
Mr. John’s Shoes
Hosiery Warehouse
Modern Woman Pants &
Suits Company
Special Occasion Wholesale
Dress Shop
Invoice Inv.
Number Date
PAGE 6
Terms
Post.
Ref.
Accounts
Payable
Credit
Purchases
Debit
Freight
in
Debit
101
223
556
12/26
12/28
1/3
n/30
2/10, n/30
2/10, n/30
✓
✓
✓
5,112
3,569
3,968
5,000
3,480
3,900
112
89
68
110
104
118
1012
1/5
1/9
1/14
1/20
n/30
2/10, n/30
n/60
2/10, n/30
✓
✓
✓
✓
2,360
5,529
3,200
900
2,360
5,400
3,120
900
129
80
315
1/26
n/30
✓
1,600
1,600
1044
1/27
2/10, n/30
✓
5,475
5,250
225
31,713
31,010
703
31
(205)
SALES JOURNAL
Date
2007
Jan. 4
5
6
10
14
17
21
24
25
29
31
Sales Slip
No.
101
102
103
104
105
106
107
108
109
110
111
186 䡲 Chapter 8
(501)
(502)
PAGE 1
Customer’s Name
Post.
Ref.
Accounts
Receivable
Debit
Sales Tax
Payable
Credit
Sales
Credit
Sarah Valdez . . . . . . . . . .
Linda Carter . . . . . . . . . . .
Teresa Collins . . . . . . . . . .
Demetria Davis . . . . . . . . .
Jeraldine Wells . . . . . . . . .
Amalia Rodrigez . . . . . . . .
Rosabla Vasquez . . . . . . .
Sherrye Samuels . . . . . . .
Cecila Lin . . . . . . . . . . . . .
Tonya Ennis . . . . . . . . . . .
Isabel James . . . . . . . . . .
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
864
432
432
648
540
864
2,160
432
324
648
810
64
32
32
48
40
64
160
32
24
48
60
800
400
400
600
500
800
2,000
400
300
600
750
8,154
604
7,550
(111)
(231)
(401)
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Page 187
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Date
2007
Jan. 3
NAME
Date
2007
Jan. 5
NAME
Date
2007
Jan. 25
NAME
Date
2007
Jan. 7
NAME
Date
2007
Jan. 12
NAME
Date
2007
Jan. 9
29
NAME
Date
2007
Jan. 18
Fashion Center
Description
Invoice 101, 12/26/06
TERMS
Post.
Ref.
Debit
P6
Handbag Depot
Description
Invoice 223, 12/28/06
Invoice 1012, 1/20/07
Post.
Ref.
Debit
P6
Invoice 556, 1/3/07
Post.
Ref.
Debit
P6
Invoice 104, 1/9/07
Post.
Ref.
Debit
P6
Invoice 110, 1/5/07
Invoice 315, 1/26/07
Post.
Ref.
Debit
P6
Invoice 118, 1/14/07
Credit
Balance
3,569
3,569
Credit
Balance
900
900
Credit
Balance
3,968
3,968
Credit
Balance
5,529
5,529
TERMS
Post.
Ref.
Debit
P6
P6
Mr. John’s Shoes
Description
5,112
TERMS 2/10, n/30
Modern Woman Pants & Suits Company
Description
5,112
TERMS 2/10, n/30
International Executive
Description
Balance
TERMS 2/10, n/30
House of Styles, Inc.
Description
Credit
TERMS 2/10, n/30
Hosiery Warehouse
Description
n/30
Credit
Balance
2,360
1,600
2,360
3,960
TERMS
Post.
Ref.
Debit
P6
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
n/30
n/60
Credit
Balance
3,200
3,200
Chapter 8 䡲 187
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Page 188
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME
Special Occasion Wholesale Dress Shop
Date
2007
Jan. 31
Description
Invoice 1044, 1/27/07
TERMS 2/10, n/30
Post.
Ref.
Debit
P6
Credit
Balance
5,475
5,475
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Linda Carter
Date
2007
Jan. 5
NAME
Description
Sales Slip 102
NAME
NAME
Sales Slip 103
NAME
432
Sales Slip 104
Post.
Ref.
Debit
S1
432
Post.
Ref.
Debit
S1
648
Tonya Ennis
Sales Slip 110
Post.
Ref.
Debit
S1
648
Isabel James
188 䡲 Chapter 8
Credit
Post.
Ref.
Debit
S1
810
Balance
n/30
Balance
432
Credit
n/30
Balance
648
Credit
n/30
Balance
648
TERMS
Description
n/30
432
TERMS
Description
Sales Slip 111
Credit
TERMS
Description
Date
2007
Jan. 31
S1
Demetria Davis
Date
2007
Jan. 29
Debit
TERMS
Description
Date
2007
Jan. 10
Post.
Ref.
Teresa Collins
Date
2007
Jan. 6
TERMS
Credit
n/30
Balance
810
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Page 189
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME
Cecila Lin
Date
2007
Jan. 25
NAME
Description
Sales Slip 109
NAME
Description
Sales Slip 106
NAME
Description
Sales Slip 108
NAME
Description
Sales Slip 101
NAME
Description
Sales Slip 107
Description
Sales Slip 105
Credit
Post.
Ref.
Debit
S1
864
Credit
Debit
S1
432
Credit
Debit
S1
864
Credit
Debit
S1
2,160
Credit
Debit
S1
540
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
n/30
Balance
n/30
Balance
n/30
Balance
2,160
TERMS
Post.
Ref.
Balance
864
TERMS
Post.
Ref.
n/30
432
TERMS
Post.
Ref.
Balance
864
TERMS
Post.
Ref.
n/30
324
TERMS
Jeraldine Wells
Date
2007
Jan. 14
324
Rosabla Vasquez
Date
2007
Jan. 21
S1
Sarah Valdez
Date
2007
Jan. 4
Debit
Sherrye Samuels
Date
2007
Jan. 24
Post.
Ref.
Amalia Rodrigez
Date
2007
Jan. 17
TERMS
Credit
n/30
Balance
540
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GENERAL LEDGER
ACCOUNT
Accounts Receivable
Date
Description
2007
Jan. 31
ACCOUNT
Description
2007
Jan. 31
Debit
2007
Jan. 31
Post.
Ref.
Debit
2007
Jan. 31
Post.
Ref.
Debit
2007
Jan. 31
190 䡲 Chapter 8
604
Post.
Ref.
Debit
Credit
31,010
7,550
P6
Debit
703
501
Balance
Debit
Credit
31,010
ACCOUNT NO.
Post.
Ref.
401
Balance
Debit
Credit
7,550
Freight In
Description
Credit
231
Balance
Debit
Credit
ACCOUNT NO.
P6
Date
31,713
ACCOUNT NO.
Purchases
Description
Credit
205
Balance
Debit
Credit
604
S1
Date
Credit
ACCOUNT NO.
Sales
Description
8,154
31,713
S1
Date
ACCOUNT
Post.
Ref.
111
Balance
Debit
Credit
ACCOUNT NO.
Sales Tax Payable
Description
Credit
8,154
P6
Date
ACCOUNT
Debit
Accounts Payable
2007
Jan. 31
ACCOUNT
Post.
Ref.
S1
Date
ACCOUNT
ACCOUNT NO.
Credit
502
Balance
Debit
Credit
703
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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WORLD OF FASHIONS
Schedule of Accounts Payable
January 31, 2007
Fashion Center . . . . . . . . . . . . . . . . . . . . . .
Handbag Depot . . . . . . . . . . . . . . . . . . . . .
Hosiery Warehouse . . . . . . . . . . . . . . . . . .
House of Styles, Inc. . . . . . . . . . . . . . . . . . .
International Executive . . . . . . . . . . . . . . . .
Modern Woman Pants & Suits Company . .
Mr. John’s Shoes . . . . . . . . . . . . . . . . . . . .
Special Occasion Wholesale Dress Shop .
5,112
3,569
900
3,968
5,529
3,960
3,200
5,475
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,713
WORLD OF FASHIONS
Schedule of Accounts Receivable
January 31, 2007
Linda Carter . . . . . . . . . . . . . . . . . . . . . . . .
Teresa Collins . . . . . . . . . . . . . . . . . . . . . . .
Demetria Davis . . . . . . . . . . . . . . . . . . . . . .
Tonya Ennis . . . . . . . . . . . . . . . . . . . . . . . .
Isabel James . . . . . . . . . . . . . . . . . . . . . . .
Cecila Lin . . . . . . . . . . . . . . . . . . . . . . . . . .
Amalia Rodrigez . . . . . . . . . . . . . . . . . . . . .
Sherrye Samuels . . . . . . . . . . . . . . . . . . . .
Sarah Valdez . . . . . . . . . . . . . . . . . . . . . . .
Rosabla Vasquez . . . . . . . . . . . . . . . . . . . .
Jeraldine Wells . . . . . . . . . . . . . . . . . . . . . .
432
432
648
648
810
324
864
432
864
2,160
540
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,154
Net Delivered Cost of Purchases
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight In . . . . . . . . . . . . . . . . . . . . . . . . . .
$31,010
703
Delivered Cost of Purchases . . . . . . . . . . .
$31,713
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Critical Thinking Problem
1. To determine whether Passions Linen Shop was billed in error:
a. Review Passions Linen Shop’s purchase order file for duplicate orders to Sensuous Linen Company.
If two orders were placed for the same merchandise, check the receiving reports to determine if both
shipments were received. If Passions Linen Shop does not prenumber its purchase orders, two
orders may have been issued for the same merchandise. If only one purchase order was placed,
check the receiving reports for a duplicate shipment.
b. If no duplicate purchase order or duplicate receipt of merchandise is found, ask Sensuous Linen
Company to identify why they made two shipments of sheets. If Sensuous Linen Company made
the second shipment in error, they will be obligated to accept return of the sheets.
2. To prevent this situation from occurring again:
a. Prenumber all purchase order forms and periodically check to be sure that all forms can be
accounted for.
b. Require all purchase orders to have proper authorization before they are issued. Alexander can
authorize all purchase orders, or she can designate appropriate personnel to handle this function.
c. Require all shipments of merchandise received by the shop to be compared to the corresponding
purchase order and the invoice received from the supplier. Any shipment for which there is no
purchase order should be questioned immediately.
d. Require the purchase order and corresponding receiving report to be attached to the invoice before
it is presented for payment.
Alexander can establish internal control procedures to reduce the possibility of issuing duplicate purchase
orders, but she cannot prevent suppliers from making duplicate shipments in error. If the appropriate
documentation accompanies invoices, though, she will know that the error is not Passions Linen Shop’s.
Business Connections
Managerial Focus
1. Maintenance of good credit reputation, taking advantage of cash discounts.
2. Allows a business to buy on credit, using resources more effectively.
3. It is important to establish a good credit rating for future cash needs. Additionally, cash could be used
for other purposes.
4. Protect against fraud and excessive investment in merchandise.
5. Ensures authorized-only purchases, verifies receipt of goods and accuracy of invoices, distributes
tasks.
6. Creates a storage problem, risks obsolescence of the merchandise, and ties up funds.
Ethical Dilemma
Anait’s actions are not ethical. If she cannot get a raise from this company she needs to locate a new job.
When she performs the unethical action of getting money from a fictitious vendor she is stealing dollar for
dollar from her company. Her money comes right out of net income for this company.
When Anait finds how easy it is to get this money she will create more vendors and more invoices. To
prevent these actions the controller should require each vendor to receive his/her approval. The procedure
to only view the checks over $100 can still be maintained with this one approval process.
Streetwise
1. $5,766 million, increased by $607 million.
2. Adoption of new accounting rules (EITF 02-16), improved inventory management, and changes in
merchandising mix.
192 䡲 Chapter 8
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Financial Statement Analysis
1. 2004: 76.8%; 2003: 76.1%
2. Answers will vary. Students may suggest price changes on merchandise from suppliers, discounts, or
shipping costs variances.
Analyze Online: Answers will vary depending on the year.
Extending the Thought
Answers will vary. Students should demonstrate an understanding of the proper procedure when processing
accounts payable. They should discuss the purchase order, receipt of merchandise, comparison of receiving
report to invoice, and then payment of invoice.
Business Communication
Students’ memos will vary. Students should demonstrate an understanding of the division of labor necessary
to ensure a system of checks and balances. They may suggest that only one person have the authority to
place orders with a supplier, while another person be responsible for the receipt of the order. A third
employee should process the invoice for payment.
Team Work
The most advantageous would be a Net 45 days to pay the companies accounts payable, and have the
customers pay 2/10 net 30. Your customers would then be paying you before you need to pay the vendor.
Internet Connection
Your Company address and phone number and the vendor’s name and address. The amount of the check
or purchase order. Reference for the purchase order number or purchase requisition.
Practice Test Answer Key
Part A
1. T
2. F
3. F
4. T
5. F
6. F
7. T
8. F
9. F
10. T
11. F
12. T
13. T
14. T
15. T
16. T
17. T
18. T
True–False
Part B Exercise
1. In the Cost of Goods Sold Section.
2. The Accounts Payable Column.
3. The General Journal.
4. It is not recorded in the purchases journal at all;
it is entered in the cash payments journal.
5. Accounts Payable Credit = Purchases Debit +
Freight In Debit.
6. All Columns.
7. An Expense.
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 8 䡲 193