Journalizing Purchases and Cash Payments
24. Corporations
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
2
25. Purchases & purchases journal
Merchandise – goods that a business purchases to sell
Merchandising business – a business that purchases and
sells goods
Retail merchandising business – sells to those
who use or consume the goods
Wholesale merchandising business – buys and
resells merchandise to retail merchandising
businesses
3
25. Purchases & purchases journal
Cost of merchandise – 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 or other assets are bought
4
25. Purchases & purchases journal
Special journal – a journal used to record only one kind
of transaction
Five journals we will use:
1. Purchases
2. Cash Payments
3. Sales
4. Cash Receipts
5. General
5
25. Purchases & purchases journal
Purchases journal – special journal
used to record only purchases of
merchandise on account
Purchase on account – a transaction
in which the merchandise purchased is to be paid for later
Special amount column – a journal amount column
headed with an account title
6
25. Purchases & purchases journal
Special amount column – a journal amount column
headed with an account title
Accounting concept: Historical Cost – when the actual
amount paid for the merchandise or other items bought is
recorded
7
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.
8
LESSON 9-1
25. Purchases & purchases journal
Purchase invoice – an invoice used as a source document
for recording a purchase on account transaction
Terms of sale – an agreement between a
buyer and a seller about payment for
merchandise
9
PURCHASING MERCHANDISE ON
ACCOUNT
November 2. Purchased merchandise on account from Crown
Distributing, $2,039.00. Purchase Invoice No. 83.
2
1
1.
2.
3.
4.
10
3
Write the date.
Write the vendor name.
Write the purchase invoice number.
Write the amount of the invoice.
LESSON 9-1
4
page 239
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.
11
LESSON 9-1
4. Add the amount column.
5. Write the total.
6. Rule double lines across
the amount column.
6
26. Cash payments journal
Cash payments journal – special journal used to record
only cash payment transactions
Cash discount – a deduction that a vendor allows on the
invoice amount to encourage prompt payment
Purchases discount – a cash discount on purchases taken
by a customer
12
26. Cash payments journal
General amount column – journal amount column that is
NOT headed with an account title
13
CASH PAYMENT OF AN EXPENSE
page 243
November 2. Paid cash for advertising, $150.00. Check No. 292.
1
1.
2.
3.
4.
5.
14
2
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
LESSON 9-2
3
4
5
BUYING SUPPLIES FOR CASH
page 243
November 5. Paid cash for office supplies, $94.00. Check No. 293.
1
1.
2.
3.
4.
5.
15
2
3
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
LESSON 9-2
4
5
CASH PAYMENTS FOR PURCHASES
page 244
November 7. Purchased merchandise for cash, $600.00. Check
No. 301.
2
1
1.
2.
3.
4.
5.
16
3
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
LESSON 9-2
4
5
26. Cash payments journal
List price – the retail price listed in a catalog or on an
Internet site
Trade discount – a reduction in the list price granted to
customers
*Note: No journal entry is made to show the amount of a
trade discount
Ex: List price $1,500 less 60% discount
17
26. Cash payments journal
Cash discount examples: 2/10 n/30
Contra account – an account that reduces a related
account on a financial statement
Normal balance
18
CASH PAYMENTS ON ACCOUNT
WITH PURCHASES DISCOUNTS
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
1.
2.
3.
4.
5.
6.
19
2
4
3
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
page 245
6
CASH PAYMENTS ON ACCOUNT
WITHOUT PURCHASES DISCOUNTS
page 246
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.
20
Write the date.
Write the vendor account title.
Write the check number.
Write the debit amount.
Write the credit amount.
LESSON 9-2
5
33. Cash payments journal (con’t)
Cash short – petty cash on hand amount that is less than a
recorded amount
Cash over– petty cash
on hand amount that is
more than a recorded
amount
21
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.
22
LESSON 9-3
page 248
2
4
6
7
8
REPLENISHING A PETTY CASH FUND
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
1
2
23
3
LESSON 9-3
5
6
TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL
page 250
PAGE TO CARRY TOTALS FORWARD
1
2
1.
2.
3.
4.
5.
6.
24
3
4
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.
25
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.
26
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
27. General journal
27
BUYING SUPPLIES ON ACCOUNT
page 255
November 6. Bought store supplies on account from Gulf Craft
Supply, $210.00. Memorandum No. 52.
2
3
1
1. Write the date.
2. Write the account title.
3. Write the memorandum
number.
4. Write the debit amount.
28
4
LESSON 9-4
5
7
6
5. Write the account title and
vendor name.
6. Place a diagonal line in the
Post. Ref. column.
7. Write the credit amount.
27. General journal
Purchases return – 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 (DM) – form prepared by the
customer showing the price deduction taken by the
customer for returns and allowances
29
DEBIT MEMORANDUM FOR PURCHASES
RETURNS AND ALLOWANCES
page 256
30
LESSON 9-4
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
4
6
1. Write the date.
2. Write the account title and
vendor name.
3. Place a diagonal line in the
Post. Ref. column.
31
LESSON 9-4
4.
5.
6.
7.
3
7
Write debit memorandum number.
Write the amount.
Write Purchases Returns and Allow.
Write the amount.