Accounting
Journalizing Purchases and Cash
Payments
February 9,2012
Cinnamon Challenge
• http://www.youtube.com/watch?v=Cyk7utV_
D2I&safety_mode=true&persist_safety_mode
=1&safe=active
• http://www.youtube.com/watch?v=qt1Hx_qE
6G8&safety_mode=true&persist_safety_mod
e=1&safe=active
LESSON 9-1
Journalizing Purchases Using a
Purchases Journal
Real World Accounting
• Page 233
• 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
On the same page (233), 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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•
•
•
•
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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 Pyramid
• merchandise
• merchandising business
• retail merchandising
business
• wholesale merchandising
business
• corporation
• share of stock
• capital stock
• stockholder
8
LESSON 9-1
Chapter 9.1 Pyramid
•
•
•
•
•
•
•
•
•
9
LESSON 9-1
special journal
cost of merchandise
markup
vendor
purchase on account
purchases journal
special amount column
purchase invoice
terms of sale
Critical Thinking Page 234
• Read the critical thinking article on page 234 of
the textbook and write your answers on your
vocabulary handout.
• Answer: The amount of capital needed by a very
large corporation cannot be provided by a single
individual. By combining the capital invested by
many individual stockholders, a corporation can
accumulate the resources required to purchase
the assets needed to operate the business.
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.
• http://www.inc.com/sara-blakely/the-spanxstory-how-sara-blakely-turned-footlesspantyhose-into-a-business.html?nav=vid
Question #2
• Can you identify a significant difference
between a proprietorship and a corporation?
– Answer: A corporation exists independent of its
owners.
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
page 236
The account used for recording the cost of
merchandise is title purchases. It is a cost account
and reduces capital. It has a normal debit balance,
therefore the purchases account increases by a
debit and decreases by a credit.
19
LESSON 9-1
PURCHASES ON ACCOUNT
page 236
“Purchased Merchandise” always means that
purchases is debited. It is a liability account that
summarizes the amounts owed to all vendors. It
has a normal credit balance, therefore, the
accounts payable account increases by a credit
and decreases by a debit
20
LESSON 9-1
PURCHASES JOURNAL
page 237
A special journal used to record
only purchases of merchandise
on account.
21
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.
22
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.
23
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.
24
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
25
•
•
•
•
•
•
•
•
•
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 15, 2012
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)
Agenda
• Bell Ringer (9.1 Vocab Review)
• Vocabulary Team Quiz (AKA “Pay Attention to the
Bell Ringer so YOU Don’t Ruin it for Everyone Else
Activity”
• Introduce Chapter 9.2 (Journalizing Purchases
and Cash Payments)
• Work Together & On Your Own (Aplia)
• Wrap Up (Next UP)
• Exit Ticket
Vocabulary Review
• Your goal is to match the words contained in the
plastic bag to the definitions on the spreadsheet.
• When done yell “I am awesome, deal with it!”
– Everyone Stops! (Mr. K checks for accuracy)
• Third place gets to choose a prize behind door #1,
#2, or # 3….2nd place can steal the prize or choose
another door, 1st place can pretty do whatever he
or she wants.
Team Vocab Rules
• One person starts with the definition, if you
have the Vocab word written on your card you
must claim it and read the next definition.
• The class gets two “phone a friends” saves.
– Class has to agree on the right answer
• Cheating = Starting Over
“Don’t Ruin It” Team Vocabulary Quiz
• merchandise
• merchandising business
• retail merchandising
business
• wholesale merchandising
business
• corporation
• share of stock
• capital stock
• stockholder
•
•
•
•
•
•
•
•
•
special journal
cost of merchandise
markup
vendor
purchase on account
purchases journal
special amount column
purchase invoice
terms of sale
Late Bell Ringer
– Please provide your best answer on the bell ringer
handout that you picked up this morning. Be
Prepared to discuss!
Late Bell Ringer
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.
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)
39
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
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•
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•
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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?