journalizing purchases and cash payments. 2 24. corporations corporation – an organization with...
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Journalizing Purchases and Cash Payments
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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
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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
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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
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Special journal – a journal used to record only one kind of transaction
Five journals we will use:1. Purchases2. Cash Payments3. Sales4. Cash Receipts5. General
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Purchases journal – special journalused 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
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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
8 LESSON 9-1
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1. Stamp the date received andpurchase invoice number.
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4. Review the vendor’s terms.
3. Initials of the person whochecked the invoice.
2. Place a check mark by each amount.
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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
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November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83.
1. Write the date.
2. Write the vendor name.
3. Write the purchase invoice number.
4. Write the amount of the invoice.
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661. Rule a single line across the amount column.
2. Write the date.
3. Write the word Total.
4. Add the amount column.
5. Write the total.
6. Rule double lines across the amount column.
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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
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General amount column – journal amount column that is NOT headed with an account title
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November 2. Paid cash for advertising, $150.00. Check No. 292.
1. Write the date.
2. Write the account title.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
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15 LESSON 9-2
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November 5. Paid cash for office supplies, $94.00. Check No. 293.
1. Write the date.
2. Write the account title.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
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16 LESSON 9-2
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November 7. Purchased merchandise for cash, $600.00. Check No. 301.
1. Write the date.
2. Write the account title.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
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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
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Cash discount examples: 2/10 n/30
Contra account – an account that reduces a related account on a financial statement
Normal balance
19 LESSON 9-2
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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.
1. Write the date.
2. Write the account title of the vendor.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
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6. Write the credit amount.
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November 13. Paid cash on account to American Paint, $2,650.00, covering Purchase Invoice No. 77. Check No. 303.
1. Write the date.
2. Write the vendor account title.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
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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
22 LESSON 9-3
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6. Write the actual amount of cash on hand. 88
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1. Write the date and custodian name.
2. Write the fund total.
3. Summarize petty cash payments.
4. Calculate and write the total payments.
5. Calculate and write the recorded amount 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.
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1. Date
2. Account titles
3. Check number
4. Expense amounts
5. Cash short as a debit; cash over as a credit
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6. Total cash payment
24 LESSON 9-3
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661. Rule a single line.
2. Write the date.
3. Write the words Carried Forward in the Account Title column.
4. Place a check mark in the Post. Ref. column.
5. Write each column total.
6. Rule double lines.
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1. Write the journal page number.
2. Write the date.
3. Write the words Brought Forward in the Account Title column.
4. Place a check mark in the Post. Ref. column.
5. Record the column totals.
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1. Rule a single line.
2. Write the date.
3. Write the word Totals in the Account Title column.
4. Write each column total.
5. Rule double lines.
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28 LESSON 9-4
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November 6. Bought store supplies on account from Gulf Craft Supply, $210.00. Memorandum No. 52.
1. Write the date. 5. Write the account title and vendor name.2. Write the account title.
6. Place a diagonal line in the Post. Ref. column.
3. Write the memorandum number.
7. Write the credit amount.4. Write the debit amount.
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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
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31 LESSON 9-4
4. Write debit memorandum number.
November 28. Returned merchandise to Crown Distributing, $252.00, covering Purchase Invoice No. 80. Debit Memorandum No. 78.
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1. Write the date.
5. Write the amount.2. Write the account title and vendor name. 6. Write Purchases Returns and Allow.
3. Place a diagonal line in the Post. Ref. column.
7. Write the amount.
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