Journalizing Purchases Using a Purchases Journal

 Service Business ◦ Sell services for a fee  TechKnow Consulting  Merchandising Business ◦ Purchase and sell goods  Merchandise ◦ Goods that a business purchases

 A journal used to record only one kind of transaction

 1. Purchases Journal  For all purchases of merchandise on account  2. Cash payments journal  For all cash payments  3. Sale Journal  For all sales of merchandise on account  4. Cash receipts journal  For all cash receipts  5. General Journal  For all other transactions

 Cost of Merchandise ◦ The price a business pays for a good  Markup ◦ The amount added to the cost of merchandise to establish a selling price  Vendor ◦ A business from which merchandise is purchased

 A transaction in which the merchandise purchased is to be paid at a later date.

 IMPORTANT:  Only records purchases of merchandise on account  All of Hobby Shack’s purchase on account transactions debit Purchases, and credit Accounts Payable Special Amount Column

 Source document for recording a purchase on account transaction ◦ Quantity ◦ Description ◦ Price ◦ Total amount of the invoice

9LESSON Stamp the date received and purchase invoice number page Review the vendor’s terms. 3.Initials of the person who checked the invoice. 2.Place a check mark by each amount.

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.

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.

 What kind of transactions are recorded on the purchases journal? ◦ Purchase of Merchandise on Account  What are special amount columns in a journal used for? ◦ Frequently occurring transactions  Why are there two account titles in the amount column of the purchases journal? ◦ Because the same two accounts are always affected by a purchase on account transaction  Define: Markup ◦ The amount added to the cost of merchandise to establish a selling price.

Using the Cash Payments Journal

 Students will ◦ Discuss discounts and what they are used for ◦ Examine the different types of Terms of Sale ◦ Identify the use of a Cash Payments Journal

only cash payment transactions  A special journal used to record only cash payment transactions  Cash Discount ◦ A deduction that a vendor allows in the invoice to encourage prompt payment.

page 243 November 2. Paid cash for advertising, $ Check No Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount

page 243 November 5. Paid cash for office supplies, $ Check No Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount

 List Price ◦ Retail prices listed in a catalog or on an internet site  Trade Discount ◦ A reduction in the list price granted to customers  When a trade discount is granted, the seller’s invoice shows actual amount charged

 Step 1 ◦ Total Price x Trade Discount Rate=Trade Discount  Step 2 ◦ Total List Price - Trade Discount=Invoice Amount November 7. Purchased merchandise for cash, $1,500, less a 60% trade discount. Check no. 301 $1,500 x60% =$900 $1,500 -$900 =$600

page 244 November 7. Purchased merchandise for cash, $ Check No Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount

 Terms of Sale ◦ 2/10, n/30  Two ten, net thirty  2% discount if paid within 10 days of purchase  Net 30 ◦ Total must be paid within 30 days

 5/7, n/30 ◦ What does it mean?  5% discount if you pay within 7 days, otherwise pay in full in 30 days  3/15, n/60 ◦ What does it mean?  3% discount if you pay within 15 days, otherwise full payment is due in 60 days

 Step 1 ◦ Purchase Invoice Amount x Discount Rate = Purchases Discount  Step 2 ◦ Purchase Invoice Amount – Purchase Discount Amount = Cash Amount AFTER discount $498 x 2% (.02) =$9.96 $498 -$9.96 =$ 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.

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 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 Write the credit amount. 65

page 246 November 13. Paid cash on account to American Paint, $2,650.00, covering Purchase Invoice No. 77. Check No Write the date. 2.Write the vendor account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount

Performing Additional Cash Payments Journal Operations

2 page Write the actual amount of cash on hand 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.

56 page Date 2. Account titles 3. Check number 4. Expense amounts 5. Cash short as a debit; cash over as a credit Total cash payment

page 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.

1 234 page 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. 5

2 3 4 page 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. 1 5

Journalizing Other Transactions Using a General Journal

page 254

page 255 November 6. Bought store supplies on account from Gulf Craft Supply, $ Memorandum No 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. 7

page 256

4. Write debit memorandum number. November 28. Returned merchandise to Crown Distributing, $252.00, covering Purchase Invoice No. 80. Debit Memorandum No. 78. page 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. 7

 purchases return  purchases allowance  debit memorandum page 258