Chapter 9
Accounting 1
 In



your notebooks:
Of all accounts in the general ledger, which
account do you believe is impacted most?
Why this account in particular?
Do you think this would constitute a special
journal?
 Cash
payments journal: special journal
used to record only cash payment
transactions



May be designed to accommodate a business’
frequent cash payment transactions
Special amount column for this general ledger
account
Many cash transactions affect accounts
payable, so a special amount column is also
used for that general ledger account
 Source
document is usually a check
 Cash
discount: deduction vendor allows on
invoice amount to encourage prompt
payment
 Purchase discount: cash discount on
purchases taken by a customer


when taken, a customer pays less than invoice
amount previously recorded in purchases account
Reduces customer’s cost of merchandise
purchased
 General
amount column: journal amount
column not headed with account title


P. 242 and 243
Includes:

A general debit and credit column.


For occasional cash transactions, such as rent
3 special columns
 1. Accounts Payable debit


2. Purchase discount credit


For payments made on accounts payables
A cash discount received when you pay cash for purchases of
merchandise
3. Cash credit

A deduction given by the vendor to encourage prompt
payment
P.
243
 Supplies
not recorded in purchases account
because supplies aren’t intended for sale

Cash register tapes and price tags are examples
of supplies used in a business
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
3
4
4
5
5
6
6
7
7
8
8
Page 243
 Cash
payment for expense
 Cash payment for supplies
November 2. Paid cash for advertising, $150.00. Check No. 292
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
Nov
2
Advertising Expense
292
150.00
150.00 1
2
2
3
3
4
4
5
5
6
6
7
7
8
8
November 6. Paid cash for office supplies, $94.00. Check No. 293
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
Nov
2
Advertising Expense
292
150.00
150.00 1
2
Nov
5
Supplies—Office
293
94.00
94.00 2
3
3
4
4
5
5
6
6
7
7
8
8
 Cash
payment for expense
 Cash payment for supplies
 Practice:


9 – 2 WT
Oct 1st and 7th transactions
Page 244
 Cash payment for purchases
 Merchandise usually purchased on account
(use purchase journal)

Might be cash because



Discounts make it a better choice to pay cash
New customer, so credit not offered by the vendor
Poor paying history, so credit rescinded by the
vendor

Business would pay vendor with check before
merchandise is shipped or delivered
 List
price: retail price listed in catalog or on
Internet site
 Trade
discount: reduction in list price
granted to customers


Given when merchandising business purchases
number of products from manufacturer
Invoice amount: amount after trade discount is
deducted from list price

only the invoice amount is used in a journal entry
 Trade

discount – Reduces list price
Due to quantities being purchased – the more
purchased, the lower the price
List Price
x
Trade Discount Rate
=
Trade
Discount
1500.00
x
60%
=
900.00
Total List Price
-
Trade Discount
=
Invoice
Amount
1500.00
-
900.00
=
600.00
November 7. Purchased merchandise for cash $600.00, Check #301.
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
Nov
2
Advertising Expense
292
150.00
150.00 1
2
Nov
5
Supplies—Office
293
94.00
94.00 2
3
11
7
Purchases
301
600.00
600.00 11
12
12
13
13
14
14
15
15
 Practice:


9-2 WT
October 11
Page 245
 Discounts are offered for prompt payment on
Merchandise purchases
 Invoices will show the terms of sale:

Example: 2/10,n/30
2/10: 2% of the invoice amount may be
deducted if paid within 10 days
n/30: Net thirty – the total invoice amount
must be paid within 30 days
Example: 2/10,n/30
Calculate:
Invoice amount - $1,000
Invoice date – 3/1/2013
Terms 2/10, n/30



If paid by March 10: Pay discount: $1,000 - $20 = $980
If paid after March 10: Pay net amount - $1,000
If paid after March 31: Your payment is late and may result in
finance charges
Purchase
Invoice Amt
x
Purchase
Discount Rate
=
Purchase
Discount
$1,000
x
2%
=
$20
Purchase Invoice
Amount
-
Purchase Discount
=
Cash Amount After
Discount
$1,000
-
$20
=
$980
 Contra
account: account that reduces
related account on financial statement
 Purchases discounts recorded in general
ledger account titled Purchases Discount


Purchases discount is contra account to
Purchases
Since contra accounts are deductions from
related accounts, contra account normal
balances are opposite the normal balances of
related accounts


Therefore, normal balance of Purchases Discount
account is a credit
Even though trade discounts aren’t recorded, cash
discounts are recorded
Page 245

Purchase Discounts
Page 245
 Calculate your Purchase Discount:
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.
Purchase Invoice Amt
x
Purchase Discount
Rate
=
Purchase
Discount
$498.00
x
2%
=
$9.96
Purchase Invoice
Amount
-
Purchase Discount
=
Cash Amount
After
Discount
$498.00
-
$9.96
=
$488.04
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.
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
Nov
2
Advertising Expense
292
150.00
150.00 1
2
Nov
5
Supplies—Office
293
94.00
94.00 2
3
11
Nov
8
Gulf Craft Supply
302
498.00
9.96
488.04 11
12
12
13
13
14
14
 Some
vendors don’t offer purchases
discounts
 Business may not have cash available to take
advantage of purchases discount

In both cases, full purchase invoice is paid
 Practice:


Finish 9-2 WT
Complete 9-2 OYO