CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 9-2 Journalizing Cash Payments Using a Cash Payments Journal

CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 9-2 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.

CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 9-2 CASH PAYMENTS JOURNAL page 242 Purchases Discount: a cash discount on purchases taken by a customer. Customer pays less than the invoice amount previously recorded in the purchases account. General Amount Column: a journal amount column that is not headed with an account title. (General Debit & General Credit)

CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 9-2 CASH PAYMENT OF AN EXPENSE 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

CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 9-2 BUYING SUPPLIES FOR CASH 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

CENTURY 21 ACCOUNTING © Thomson/South-Western CASH PAYMENTS FOR PURCHASES Trade Discount Trade Discount: a reduction in the list price granted to customers List Price: the retail price listed in a catalog or on an Internet site (suggested by manufacturers) Invoice Amount: the amount after the trade discount has been deducted from the list price 6 LESSON 9-2

CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 9-2 CASH PAYMENTS FOR PURCHASES 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

CENTURY 21 ACCOUNTING © Thomson/South-Western CASH PAYMENTS FOR PURCHASES Step 1: Total List Price x Trade Discount Rate = Trade Discount $1, % $ Step 2: Total List Price – Trade Discount = Invoice Amount $1, $ $ LESSON 9-2

CENTURY 21 ACCOUNTING © Thomson/South-Western 9 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 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

CENTURY 21 ACCOUNTING © Thomson/South-Western CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS Step 1: Purchase Invoice Amt. x Purchases Disc. Rate = Purchases Discount $ % $9.96 Step 2: Purchase Invoice Amount – Purchases Discount = Cash Amt. After Disc. $498.00$9.96 $ LESSON 9-2

CENTURY 21 ACCOUNTING © Thomson/South-Western CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS 2/10, n/30 is a common term of sale It is read as two ten, net thirty. Two ten means 2% of invoice amount may be deducted if the invoice is paid within 10 days Net thirty means total invoice amount must be paid within 30 days Contra Account: an account that reduces a related account on a financial statement  Purchases Discount is a contra account to Purchases  Contra Accounts have opposite normal balances 11 LESSON 9-2

CENTURY 21 ACCOUNTING © Thomson/South-Western 12 LESSON 9-2 CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS 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

CENTURY 21 ACCOUNTING © Thomson/South-Western 13 LESSON 9-2 TERMS REVIEW cash payments journal cash discount purchases discount general amount column list price trade discount contra account page 247