Special Journals:
Purchases and Cash Payments
Chapter 10
10 - 1
Special Journals
Special journals assist business
owners, managers,
and accounting personnel in
efficient record keeping
and better internal control.
10 - 2
Learning Objective 1
Calculating net purchases.
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Learning Unit 10-1
Purchases = Amount of units purchased
times the cost of each unit
It is the amount that is debited to the purchases
account in the purchases journal entry.
Normal balance is a debit.
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Learning Unit 10-1
Accounts Affected Category
Purchases
Accounts Payable
Rules
Cost
Dr. 4,000
Liability
Cr. 4,000
10 - 5
Learning Unit 10-1
The Purchases Returns and Allowances
account is used to record a reduction of
an amount owed.
 A debit memo is issued for returned,
damaged, or defective purchased
merchandise.
 The amount of these reductions and
refunds is credited in the journal entry.
 Normal balance is a credit.

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Learning Unit 10-1
Accounts Affected Category
Rules
Accounts Payable
Liability
Dr. 500
Purchases Returns
and Allowances
ContraCost
Cr. 500
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Learning Unit 10-1
Purchases discount = A percent decrease
in the amount paid to a supplier.
All payments should be timely
to take advantage of this discount.
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Learning Unit 10-1
F.O.B. destination:
The seller is responsible for freight.
F.O.B. shipping point:
The buyer is responsible for freight.
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Learning Objective 2
Journalizing transactions
in a purchases journal.
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Learning Unit 10-2
The following steps are taken in purchasing
merchandise and recording purchases:
1 Prepare a Purchase Requisition:
This is a request that merchandise be
purchased for resale to customers.
2 Prepare a Purchase Order:
Check price lists for the best purchase deal.

10 - 11
Learning Unit 10-2
3 Prepare a Sales Invoice:
This is done by the seller company.
4 Prepare a Receiving Report:
This is done when the goods are received.
5 Verifying the Numbers:
All numbers are cross-checked for accuracy
prior to recording and payment.
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Learning Objective 3
Posting from a purchases journal
to the accounts payable subsidiary
ledger and the general ledger.
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Learning Unit 10-2
Recorded purchases are posted in total to
the Purchases account and the Accounts
Payable account.
 They are also recorded as credits to
individual creditors in the Accounts Payable
account.

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Purchases Journal
Accounts
Date Account
Payable
20xx Credited Terms
Credit
July 1 XYZ Co. 2/10, n/30 1,000
Purchases
Debit
Supplies
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Learning Unit 10-2
Special Journals
Purchases Journal
Purchases of inventory for resale on account
Cash Payments Journal
All payments of cash (cash disbursements journal)
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Learning Unit 10-2
Purchase transaction amounts are posted to
each supplier in the purchases journal and
accounts payable subsidiary ledgers.
 This process allows up-to-date records of
accounts payable balances.

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Learning Unit 10-2
The purchases journal records all purchases
on account (credit purchases only).
 Each credit purchase transaction is posted to
each accounts payable supplier as a credit.
 The totals of the Accounts Payable, and
Purchases columns are posted to each of
these general ledger accounts.
 Cash discount terms are listed.

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Learning Objective 4
Preparing, journalizing, recording,
and posting a debit memorandum.
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Learning Unit 10-2
What is a debit memorandum?
 It is a record of purchases, returns and
allowances showing amounts that were
deducted from the balance owed to
creditors.
 It relates to a contra-expense account with
a normal credit balance.

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Learning Unit 10-2
Accounts Affected Category
Accounts Payable
Purchases Returns
and Allowances
Debit memo #1
Liability
ContraCost
Rules
Dr.
Cr.
10 - 21
Learning Objective 5
Journalizing and posting
from a cash payments journal.
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Learning Unit 10-3
The cash payments journal records all
payments made in cash.
 Accounts Payable, Purchase Discount, and
Cash column totals are posted to the general
ledger.
 Sundry is a miscellaneous accounts column
that provides flexibility for reporting
transactions.

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Learning Objective 6
Preparing a schedule
of accounts payable.
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Learning Unit 10-3
Accounts Payable is the controlling account
in the general ledger.
 At the end of the month, the total owed in
Accounts Payable should equal the sum
owed to the individual creditors that are
listed on the schedule of accounts payable.

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End of Chapter 10
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