Chapter 9 Objectives: Define accounting terms related to purchases and cash payments for a merchandising business Identify accounting concepts and practices related to purchases and cash payments for a merchandising business Journalize purchases of merchandise using a purchases journal Journalize cash payments and cash discounts using a cash payments journal Prepare a petty cash report and journalize the reimbursement of the petty cash fund Total, prove, and rule a cash payments journal and start a new cash payments journal page Journalize purchases returns & allowances and other transactions using a general journal LESSON 9-1

LESSON 9-1: Journalizing Purchases Using a Purchases Journal 1/28/2018 LESSON 9-1: Journalizing Purchases Using a Purchases Journal 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

Merchandising Businesses Merchandise—goods that a business purchases to sell Merchandising business—a business that purchases and sells goods Retail merchandising business—a merchandising business that sells to those who use or consume the goods Wholesale merchandising business—a business that buys and resells merchandise to retail merchandising businesses LESSON 9-1

Business Structures 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 The difference between the accounting records of proprietorships and corporations is in the capital accounts. Proprietorships have a single capital and drawing account for the owner. A corporation has separate capital accounts for the stock issued and for the earnings kept in the business. LESSON 9-1

In Chapters 9-16, we will use the business Hobby Shack, Inc. LESSON 9-1

Using Special Journals Special journal—a journal used to record only one kind of transaction Hobby Shack uses 5 journals to record daily transactions: Purchases journal—for all purchases of merchandise on account Cash payments journal—for all cash payments Sales journal—for all sales of merchandise on account Cash receipts journal—for all cash receipts General journal—for all other transactions LESSON 9-1

PURCHASING MERCHANDISE page 236 Cost of merchandise—the price a business pays for goods it purchases to sell Markup—the amount added to the cost of merchandise to establish the selling price; markup must cover all expenses plus enough extra to earn a net income Vendor—a business from which merchandise is purchased or supplies or other assets are bought Purchases is classified as a cost account. Purchases is a temporary account. Purchases has a normal debit balance. LESSON 9-1

PURCHASES ON ACCOUNT page 236 Purchase on account—a transaction in which the merchandise purchased is to be paid for later LESSON 9-1

PURCHASES JOURNAL page 237 Purchases journal—a special journal used to record only purchases of merchandise on account; purchases for cash are not recorded in the purchases journal Special amount columns—a journal amount column headed with an account title; using special amount columns eliminates writing general ledger account titles in the Account Title column LESSON 9-1

PURCHASE INVOICE page 238 1 Purchase invoice—an invoice used as a source doc for recording a purchase on account transaction 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. LESSON 9-1

PURCHASING MERCHANDISE ON ACCOUNT page 239 November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83. 2 1 3 4 1. Write the date. 2. Write the vendor name. 3. Write the purchase invoice number. 4. Write the amount of the invoice. LESSON 9-1

TOTALING AND RULING A PURCHASES JOURNAL page 240 1 4 5 3 2 6 1. Rule a single line across the amount column. 4. Add the amount column. 5. Write the total. 2. Write the date. 6. Rule double lines across the amount column. 3. Write the word Total. LESSON 9-1

Lesson 9-1 Let’s do Work Together 9-1and On Your Own 9-1 on textbook page 241 using Aplia LESSON 9-1

LESSON 9-2: Journalizing Cash Payments Using a Cash Payments Journal Terms Review cash payments journal cash discount purchases discount general amount column list price trade discount contra account

CASH PAYMENTS JOURNAL page 242 Cash payments journal—a 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 General amount column—a journal amount column that is not headed with an account title LESSON 9-2

CASH PAYMENT OF AN EXPENSE page 243 November 2. Paid cash for advertising, $150.00. Check No. 292. 1 2 3 4 5 1. Write the date. 2. Write the account title. 3. Write the check number. 4. Write the debit amount. 5. Write the credit amount. LESSON 9-2

BUYING SUPPLIES FOR CASH LESSON 9-2 1/28/2018 BUYING SUPPLIES FOR CASH page 243 November 5. Paid cash for office supplies, $94.00. Check No. 293. 1 2 3 4 5 1. Write the date. 2. Write the account title. 3. Write the check number. 4. Write the debit amount. 5. Write the credit amount. LESSON 9-2

CASH PAYMENTS FOR PURCHASES page 244 November 7. Purchased merchandise for cash, $600.00. Check No. 301. 2 1 3 4 5 1. Write the date. 2. Write the account title. 3. Write the check number. 4. Write the debit amount. 5. Write the credit amount. LESSON 9-2

CASH PAYMENTS FOR PURCHASES page 244 Trade Discount 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 Step 1: Total List Price X Trade Discount Rate = Trade Discount $1500 X 60% = $900 Step 2: Total List Price – Total Discount = Invoice Amount $1500 - $900 = $600 LESSON 9-2

CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS page 245 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 6 1 2 4 3 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. 6. Write the credit amount. LESSON 9-2

CASH PAYMENTS ON ACCOUNT WITHOUT PURCHASES DISCOUNTS page 246 Contra account—an account that reduces a related account on a financial statement Purchases Discount is a contra account to Purchases and is included in the cost of merchandise division of the general ledger. The normal balance for Purchases is a debit. So the normal balance for Purchases Discount is a credit. Step 1: Purchase Invoice Amount X Purchases Discount Rate = Purchases Discount $498 X 2% = $9.96 Step 2: Purchase Invoice Amount – Purchases Discount = Cash Amount After Discount $498 - $9.96 = $488.04 LESSON 9-2

CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS page 245 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 6 1 2 4 3 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. 6. Write the credit amount. LESSON 9-2

Lesson 9-2 Let’s do Work Together 9-2 and On Your Own 9-2 on textbook page 247 using Aplia

LESSON 9-3: Performing Additional Cash Payments Journal Operations 1/28/2018 LESSON 9-3: Performing Additional Cash Payments Journal Operations Terms Review cash short—a petty cash on hand amount that is less than a recorded amount cash over—a petty cash on hand amount that is more than a recorded amount GREEN

PETTY CASH REPORT 1. Write the date and custodian name. 1 LESSON 9-3 1/28/2018 PETTY CASH REPORT page 248 1. Write the date and custodian name. 1 2. Write the fund total. 3. Summarize petty cash payments. 2 3 4. Calculate and write the total payments. 4 5. Calculate and write the recorded amount on hand. 5 6 7 8 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. LESSON 9-3 GREEN

REPLENISHING A PETTY CASH FUND LESSON 9-3 1/28/2018 REPLENISHING A PETTY CASH FUND page 249 1. Date 2. Account titles 3. Check number 4. Expense amounts 5. Cash short as a debit; cash over as a credit 6. Total cash payment Nov 18. Paid cash to replenish petty cash fund. Check No. 310 4 5 6 1 3 2 LESSON 9-3 GREEN

LESSON 9-3 1/28/2018 TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL PAGE TO CARRY TOTALS FORWARD page 250 1 4 2 3 5 6 1. 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. LESSON 9-3 GREEN

STARTING A NEW CASH PAYMENTS JOURNAL PAGE 1 5 2 3 4 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. LESSON 9-3

LESSON 9-3 1/28/2018 TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL AT THE END OF A MONTH page 252 1 2 3 4 5 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. LESSON 9-3 GREEN

Lesson 9-3 Let’s do Work Together 9-3 and On Your Own 9-3 on textbook page 253 using Aplia LESSON 9-1

LESSON 9-4: Journalizing Other Transactions Using a General Journal 1/28/2018 LESSON 9-4: Journalizing Other Transactions Using a General Journal The general journal is used only for transactions that cannot be recorded in one of the special journals. The memorandum is used for special messages within the company. GREEN

MEMORANDUM FOR BUYING SUPPLIES ON ACCOUNT LESSON 9-4 1/28/2018 MEMORANDUM FOR BUYING SUPPLIES ON ACCOUNT page 254 LESSON 9-4 GREEN

BUYING SUPPLIES ON ACCOUNT LESSON 9-4 1/28/2018 BUYING SUPPLIES ON ACCOUNT page 255 November 6. Bought store supplies on account from Gulf Craft Supply, $210.00. Memorandum No. 52. 2 4 3 7 1 6 5 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. 4. Write the debit amount. 7. Write the credit amount. LESSON 9-4 GREEN

DEBIT MEMORANDUM FOR PURCHASES RETURNS AND ALLOWANCES page 256 Purchases return—credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer’s account 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—a form prepared by the customer showing the price reduction taken by the customer for returns and allowances 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 3 4 6 7 1. Write the date. 4. Write debit memorandum number. 2. Write the account title and vendor name. 5. Write the amount. 6. Write Purchases Returns and Allow. 3. Place a diagonal line in the Post. Ref. column. 7. Write the amount. LESSON 9-4

Lesson 9-4 Let’s do Work Together 9-4 and On Your Own 9-4 on textbook page 258 using Aplia

Problems Mastery Problem: 9-6 Challenge Problem: 9-7 Application Problems: 9-1, 9-2, 9-3, 9-4, 9-5 Mastery Problem: 9-6 Challenge Problem: 9-7