 In
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
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
your notebooks:
What is the trade discount equation?
What is the purchase discount equation?
What does an invoice amount represent?
What does “4/15, n/30” indicate?
THE PURCHASE JOURNAL:
Journalized purchases on account on a purchase journal
Debit Purchases
Credit AP (with vendor’s name)
THE CASH PAYMENTS JOURNAL:
1. Journalized expenses and supplies on a cash payments journal
2. Journalized payments for merchandise with and without
Trade discounts on a cash payments journal
Use “Purchases” in Account title
Cash purchases of merchandise are journalized
in the cash payment journal
 Purchase discounts is like a grocery store that
accepts vendor coupons.
 Trade discount equation

list price x trade disc. rate = trade disc.
then
list price – trade disc. = invoice amount.


Purchase discount equation
purchase invoice amt x purchase disc. rate = purchase
disc.
then
purchase invoice amt. - purchase disc. = cash amount
after disc.

 Petty


cash fund
Enables business to pay cash for small expenses
without writing check
Errors may be made when making payments from
petty cash fund, causing differences between
amount recorded and amount actually on hand
 Must
complete a Petty Cash Report to
reconcile the actual cash on hand versus
the cash that should be in your petty cash
fund.

A short amount means that what’s on hand is
less than what should be there, and so your
replenishment amount needs to be increased

An (over) amount means what you have on
hand is more than what you should have, and
your replenishment amount need to be
decreased.
November 18: Paid cash to replenish the petty cash fund, $208.66:
office supplies, $32.33; advertising, $50.00; miscellaneous, $128.50;
cash over, $2.17. Check No. 310..
CASH PAYMENTS JOURNAL
PAGE ?
GENERAL JOURNAL
DATE
ACCT. TITLE
CK.
NO.
POST.
REF.
DEBIT
CREDIT
ACCOUNTS
PAYABLE
DEBIT
PURCHASES
DISCOUNT
CREDIT
CASH
CREDIT
2013
1
1
2
2
3
19
18
Supplies- Office
20
Advertising Expense
21
Miscellaneous Expense
22
Cash Short and Over
23
310
32.33
208.66 19
50.00
20
128.50
21
2.17
22
23
 Petty
cash over and petty cash short
recorded in account titled Cash Short and
Over



Temporary account that is closed to Income
Summary account at end of fiscal period
Balance can be either debit or credit
Balance usually debit because petty cash fund
more likely to be short than over


Short recorded in general debit
Over recorded in general credit
 Journal
proved and ruled whenever journal
page is filled and always at the end of a
month
 “Carried
Forward” on last line of Cash
Payments Journal


Single line above column totals, double lines
below column totals
Prove debits equal credits underneath journal
 Once
journal is totaled and proved, journal is
ruled in preparation for forwarding to next
page




“Brought Forward” in Account Title Column
Check mark in Post. Ref. column to show nothing
on line needs to be posted
Proof of equality of debits and credits must occur
at month’s end
After cash payments journal is totaled and
proved at end of month, journal is ruled
 When
do we journalize in the General
Journal?

When we are buying anything OTHER THAN
MERCHANDISE on account
If transaction is not a cash payment, can’t be in cash
payments journal
 If transaction is not purchase of merchandise on account,
can’t be in purchases journal


IF TRANSACTION CAN’T BE RECORDED IN ONE OF SPECIAL
JOURNALS, IT MUST BE RECORDED IN GENERAL JOURNAL


Buy supplies on account

Invoice received from vendor, similar to purchase invoice received
when merchandise is purchased

Memorandum attached to invoice to assure no mistake is made than
that the invoice is for store supplies, NOT purchases

DEBIT Supplies – Store

CREDIT Accounts Payable

Memorandum is source document

Equality of debits and credits checked after each journal entry
When we have a PURCHASE RETURN AND ALLOWANCE

Purchase return: Customer doesn’t want to keep merchandise,
and is allowed to return for the purchase price


Purchases allowance: Customer is discontent with merchandise,
so vendor allows customer to keep it and gives a reduced price
for the merchandise


Decreases customer’s accounts payable
Decreases customer’s accounts payable
Source document: Debit Memorandum
Form prepared by customer showing price deduction taken by
customer for returns and allowances
 Called this because customer records amount as a debit (deduction) to
vendor account to show decrease in amount owed
 Diagonal line in Post Ref. column to indicate two accounts being
impacted (Accounts Payable and Vendor Account)

 Purchases


Returns and Allowances
Account that enables a business to evaluate the
effectiveness of its merchandise purchasing
activities
This account is credited for the amount of
purchases returns or allowances

Decrease amount of purchases, so it is a contra
account to Purchases account
 Thus, normal balance of Purchase Returns and
Allowances account is a credit
Nov 28. returned merchandise to Crown Distributing, $252.00,
Covering Purchase Invoice No. 80. Debit Memorandum No. 78.
GENERAL JOURNAL
11
GENERAL JOURNAL
DATE
ACCT. TITLE
DOC
NO.
POST.
REF.
DEBIT
CREDIT
2013
1
1
2
2
30
31
28
Accounts Payable/Crown Distributing
Purchases Returns and Allowances
DM 18
252.00
30
252.00
31
32
32
33
33
34
34
 PRACTICE:
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WT 9-4
OYO 9-4
Application problems 9-1 thru 9-5
Mastery Problem