© South-Western Educational Publishing Advanced Accounting Unit 1 - Departmentalized Accounting Chapter 1 - Recording Departmental Purchases and Cash Payments

© South-Western Educational Publishing T ERMS REVIEW Lesson 1-1 Asset – anything of value that is owned Liability – Amount owed by a business Equities – Financial rights to assets of a business Owner’s equity – Amount remaining after the value of all liabilities is subtracted from the value of all assets Accounting equation: Assets = Liabilities + Owner’s Equity Source document – Original business papers that contain info about business transactions Journal – Form for recording transactions in a chronological order. Lesson 1-1, page 11

© South-Western Educational Publishing T ERMS REVIEW Special journal – Journal used to record only one kind of transaction double-entry accounting – Recording of debit and credit portions of each transaction Account – Record summarizing all info pertaining to a single item in the accounting equation Ledger – Group of accounts general ledger – Contains all accounts needed to prepare financial statements Lesson 1-1, page 11

© South-Western Educational Publishing T ERMS REVIEW Subsidiary ledger – Ledger that is summarized in a single general ledger account Controlling account – Account in a general ledger that summarizes all accounts in a subsidiary ledger File maintenance – Procedure for arranging accounts in a general ledger, assigning account numbers and keeping records current Lesson 1-1, page 11

© South-Western Educational Publishing THE ACCOUNTING EQUATION Lesson 1-1, page 6 (RIGHT side of equation) (LEFT side of equation) AssetsLiabilities Owner’s Equity =+

© South-Western Educational Publishing GENERAL JOURNAL Lesson 1-1, page 7 Right side Left side AssetsLiabilities Owner’s Equity =+ CREDIT DEBIT T Account (Right side)(Left side)

© South-Western Educational Publishing T ERMS REVIEW Lesson 1-2 Departmental accounting system – Accounting system showing accounting info for two or more departments Merchandising business – Business that purchases and sells goods Posting – transferring info from a journal into a ledger account Debit memorandum – Form prepared by the customer showing the price deduction taken by the customer for returns and allowances Lesson 1-2, page 19

© South-Western Educational Publishing T ERMS REVIEW Contra account – Account that reduces a related account on a financial statement; i.e. Purchases returns and allowances is contra account to purchases; Drawing is contra account to capital. Contra balance – Account balance opposite the normal balance Lesson 1-2, page 19

© South-Western Educational Publishing Lesson 1-2, page 13 JOURNALIZING PURCHASES ON ACCOUNT June 1. Purchased tennis equipment on account from Tennis Warehouse, $ Purchase Invoice No TENNIS WAREHOUSE 976 CENTURY BLVD CUBLIN, CA SOLD TO MasterSport 4750 Appian Way San Jose, CA TERMS 2/10, n30 DATE May 29, 20-- OUR ORDER NO CUSTOMER’ ORDER NO. 336 SHIP VIA TRUCK GRX1 RG TAPE Graphite racquet Ready-Grip Tape Total Invoice ea. 10 dz. STOCK NO.DESCRIPTIONUNIT PRICEQUANITY TOTAL AMOUNT TENNIS DEPT. Approved D.P. 6/1/ Write approval date. 5.Write invoice amount. 4.Write invoice amount. 3.Record invoice number. 2.Write vendor name.

© South-Western Educational Publishing Lesson 1-2, page 14 POSTING FROM A PURCHASES JOURNAL Write the date. 5.Write vendor number. 4.Calculate new account balance. 3.Record credit amount. 2.Write journal page number.

© South-Western Educational Publishing Lesson 1-2, page 15 POSTING THE TOTALS OF A PURCHASES JOURNAL Write the date. 5.Write account number (in parentheses). 4.Calculate new account balance. 3.Write column total. 2.Write journal page number.

© South-Western Educational Publishing Lesson 1-2, page 15 PURCHASES JOURNAL WITH POSTING COMPLETED

© South-Western Educational Publishing Lesson 1-2, page 17 JOURNALIZING A DEBIT MEMORANDUM 1.Write the date. 5.Write the amount. 4.Write the amount. 3.Record debit memo number. 2.Enter vendor name June 3. Returned tennis equipment to Key Tennis Company, $54.50, from Purchase Invoice No 333. Debit Memorandum No

© South-Western Educational Publishing Lesson 1-2, page 18 POSTING FROM A PURCHASES RETURNS AND ALLOWANCES JOURNAL

© South-Western Educational Publishing T ERMS REVIEW Lesson 1-3 Cash discount – Deduction that a vendor allows on the invoice amount to encourage prompt payment Purchases discount – Cash discount on purchases taken by a customer Petty cash – Amount of cash kept on hand and used for making small payments Bank statement – Report of deposits, withdrawals, and bank balance sent to a depositor by a bank Lesson 1-3, page 27

© South-Western Educational Publishing JOURNALIZING A PURCHASES DISCOUNT June 1. Paid cash on account to Champion Tennis Supply, $514.50, covering Purchase Invoice No. 331 for tennis equipment for $ less 2% discount, $ Check No Write the date. 4.Write the debit amount. 3.Record the check number. 2.Enter vendor name. 6.Enter the credit amount. 5.Record the discount amount. Lesson 1-3, page

© South-Western Educational Publishing TAKING A DISCOUNT AFTER A PURCHASE RETURN Lesson 1-3, page 22 June 1. Paid cash on account to Golf-Tee, Inc., $220.50, covering Purchase Invoice No. 332 for golf equipment for $275.00, less Debit Memorandum No. 20 for $50.00, and less 2% discount, $4.50. Check No 316. Amount owed on invoice: Original Purchase Invoice Amount (P332) Purchase Invoice Amount After Return Purchases Return (DM20) –= $ – = $ – $4.50 $  2% = $4.50 $ = $ Purchases discount: Purchase Invoice Amount After Return Purchases Discount Purchases Discount Rate  = Amount due after purchases discount: Purchase Invoice Amount After Return Total Amount Due Purchases Discount –=

© South-Western Educational Publishing RECORDING ENTRIES IN A CASH PAYMENTS JOURNAL Lesson 1-3, page 23 1.Write the date. 3.Record the check number. 2.Enter the account title. June 1. Paid cash for office supplies, $ Check No Write the debit amount. Supplies—Office Enter the credit amount. Cash

© South-Western Educational Publishing June 30. Paid cash to replenish the petty cash fund, $402.00: office supplies, $164.00; store supplies, $136.00; advertising, $56.00; miscellaneous expense, $ Check No CASH PAYMENT TO REPLENISH PETTY CASH Lesson 1-3, page 24 1.Write the date. 3.Record check number. 2.Enter the account titles. 4.Write the debit amounts. 5.Enter the credit amount

© South-Western Educational Publishing RECONCILING A BANK STATMENT Lesson 1-3, page 25 Date: June 30, 20-- (1) Checkbook Balance$__________ Bank Charges DescriptionAmount Service Charge (2) Deduct Total Bank Charges$__________ (3) Adj. Checkbook Balance$__________ (4) Bank Balance$__________ Outstanding Deposits DateAmount (5) Add Total Outstanding Deposits$__________ (6) Total$__________ Outstanding Checks Check NoAmount (7) Deduct Total Outstanding Checks$__________ (8) Adjusted Bank Balance$__________ 1.Enter checkbook balance. 3.Deduct bank charges to obtain checkbook balance. 2.Enter and add bank charges. 4.Enter bank balance from statement. 5.Enter and add outstanding deposits. 6.Add outstanding deposits to balance. 7.Deduct total outstanding checks. 8.Verify adjusted checkbook balance and adjusted bank balance are the same. 6/30 12, , , , , Credit Card Fee , ,

© South-Western Educational Publishing JOURNALIZING BANK CHARGES Lesson 1-3, page 26 June 30. Received bank statement showing bank service charge, $ Memorandum No 18. June 30. Recorded credit card fee expense for June, $ Memorandum No. 19. Miscellaneous Expense Cash Credit Card Fee Expense Cash