Ch. 17: Purchases and Cash Payments Accounting II Ms. Alltucker

Chapter Objectives Explain the purpose of the purchases and cash payments journal Record transactions in the purchases journal and cash payments journal Record payroll transactions in the cash payments journal Post from the purchases and cash payments journal Total, prove, and rule the purchases and cash payments journals Prepare a schedule of accounts payable Prove cash Define accounting terms introduced in this chapter

Ch 17-1 The Purchases Journal What you will learn: The purpose of the purchases journal How to record purchases on account How to post from purchases journal How to total, prove, rule the purchase journal Why it’s important: The purchases journal helps businesses keep track of purchases on account.

Purchase Journal Special journal used to record all purchases on account

Recording the Purchase of Merchandise on Account Business Transaction On December 14, On Your Mark received Invoice 7894 from Pro Runner Warehouse for merchandise purchased on account, $2,300, terms 2/10, n/30. JOURNAL ENTRY

Recording the Purchase of Merchandise on Account Enter the date Enter the invoice number Enter the creditor’s name Enter the TOTAL of the invoice in the Accounts Payable Credit column For purchases of merchandise on account– enter the total amount of the invoice in the purchases debit column **after the invoice is journalized, it is placed in a tickler file by due date

Journalizing Other Purchases on Account Businesses often purchases supplies and other assets on account These purchases do not occur often enough to set up special columns in the purchases journal When this occurs, recorded in the general debit column of the purchases journal

Journalizing Other Purchases on Account On December 15 On your Mark received Invoice #3417 from Champion Store Supply for store equipment bought on account $1200, terms n/30. Dec 15 3417 Chapman Store Supply 1200 Store Equip 1200

Journalizing Other Purchases on Account Enter date invoice was RECEIVED Enter the invoice number Ender credits name in the Creditor’s Account Credited column Enter the TOTAL of the invoice in the A/P credit column Write the name of the general ledger account being debited in the general account debited column Store equipment is not merchandise purchased for resale DO NOT RECORD IN THE PURCHASES DEBIT COLUMN Enter the total amount of the invoice in the general debit column

Posting to the A/P Subsidiary Ledger Each transaction in the purchases journal is a purchase on account Each transaction is separately posted to the accounts payable subsidiary ledger Transactions are posted DAILY

Posting to the A/P Subsidiary Ledger

Posting to the A/P Subsidiary Ledger Enter the date of the transaction Record post reference number P6 In credit column of the subsidiary ledger, enter the amount owed to the creditor Compute the new account balance Return to purchases journal and place a check mark in the first post reference column

Posting from the General Debit Column Daily postings

Posting from the General Debit Column Enter the date of transaction Enter the post reference number, P6 In the debit column of the general ledger account, enter the amount recorded Compute the new balance Return to purchases journal and place the general ledger account number in the General Posting reference column

Totaling, Proving, and Ruling the Purchases Journal Draw a single line across the three amount columns Accounts payable credit Purchases debit General debit Foot each amount column Test for the equality of debits and credits Debit Columns Credit Columns Purchases $15,400 General 1,450 $16,850 Accounts Payable $16,850

Totaling, Proving, and Ruling the Purchases Journal In the date column, on the line below the single rule, enter the date the journal is being totaled On the same line, write totals Enter the three column totals in ink below the footing Draw a double line across the three amount columns LOOK ON PAGE 454 FOR AN EXAMPLE

Totaling, Proving, and Ruling the Purchases Journal A completed purchase journal is a quick reference tool to review current transactions that affect purchases and accounts payable Miscellaneous purchases are reflected here too If a general journal had been used, these transactions would have been mixed in with all of the other transactions

Posting the Special Column Totals of the Purchases Journal After the purchases journal is proven—post the totals of the: Accounts payable credit column Purchases debit column Calculate the new balance Write the general ledger account number, in parentheses, in the column below the double rule The total of the general debit column is not posted Put a check mark below that column Indicates that the total is not to be posted LOOK ON PAGE 456 FOR AN EXAMPLE