CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 9-1 Journalizing Purchases Using a Purchases Journal

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 9-1 TERMS REVIEW—start vocab right away!! 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 Historical cost page 241

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Corporation—business structure (business organization) Business has legal rights as a person (business entity) A corporation can own property, incur liabilities, and enter into contracts in its own name A person becomes the owner of a corporation by buying share of stock Why would a corporation sell stock? Corporation have different capital accounts than proprietorships—we’ll about these in a few chapters Financial statements are sent to stock holders periodically—additional financial statements exist What corporations can you think of? Do you or your parents own stock in any corporations? 3 LESSON 9-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Service vs. merchandising Name a service business, retail merchandising. What are the differences between the two? What type of transactions would retail merchandising have that a service business didn’t?—chart of accounts on page 231 What’s the difference between retails merchandising and wholesale merchandising? 4 LESSON 9-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Special journals If a company has a lot of daily transactions then they may choose to use special journals. For example– purchases journal, cash payments journal, sales journal, cash receipts journal, etc. All other transactions would still go in the general journal. In this chapter, we will use a purchases journal. 5 LESSON 9-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Purchasing merchandise—let’s look at chart of accounts on page 231 Merchandise is recorded in a purchases account (ONLY goods that are purchased for resale are recorded here! NOT supplies!! Businesses add markup to cover cost of merchandise plus other expenses with enough to earn net income If markup is too high they could lose business to competition Revenue earned from the sale of merchandise includes the cost of merchandise and the markup. ONLY the markup increases capital 6 LESSON 9-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 9-1 PURCHASING MERCHANDISE page 236 Normal balance is debit Debit increases, credit decreases Temporary account Cost of merchandise reduces capital when things are purchased

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 9-1 PURCHASES ON ACCOUNT page 236 Historical cost Purchase on account All purchases are summarized into accounts payable account Accounts payable has a normal balance credit side Increase credit, decrease debit

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 9-1 PURCHASES JOURNAL page 237 All purchaes on account are recorded in the purchases journal. If a purchase is made for cash, the transaction is NOT recorded in the purchases journal Saves time—two headings— purchases debit and accts payable credit

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON Stamp the date received and purchase invoice number. PURCHASE INVOICE– invoice used as source document for purchase on account page Review the vendor’s terms. 3.Initials of the person who checked the invoice. 2.Place a check mark by each amount.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 9-1 PURCHASING MERCHANDISE ON ACCOUNT page 239 November 2. Purchased merchandise on account from Crown Distributing, $2, Purchase Invoice No Write the date. 2.Write the vendor name. 3.Write the purchase invoice number. 4.Write the amount of the invoice.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 9-1 TOTALING AND RULING A PURCHASES JOURNAL page 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.