1. Learning Objectives © 2015 Cengage Learning. All Rights Reserved. LO3Explain the purpose of a departmental accounting system. LO4Journalize departmental purchases of merchandise on account using a purchases journal. LO5Post merchandise purchases to an accounts payable ledger and a general ledger. LO6Journalize departmental purchases returns and allowances. LESSON1-2 Journalizing and Posting Purchases and Purchases Returns

2. © 2015 Cengage Learning. All Rights Reserved. Departmental Accounting System ●An accounting system showing accounting information for two or more departments is called a departmental accounting system. ●A business that purchases and sells goods is called a merchandising business. ●All departmental purchases of merchandise on account are recorded in a purchases journal and can be traced to a purchase invoice. Lesson 1-2 SLIDE 2 © 2015 Cengage Learning. All Rights Reserved. LO3

3. © 2015 Cengage Learning. All Rights Reserved. Journalizing Purchases on Account Lesson 1-2 SLIDE 3 © 2015 Cengage Learning. All Rights Reserved. LO4 Approval Date 1 1 2 2 Vendor Name Invoice Number 3 3 Invoice Amount Sales Department 4 4 5 5 May 1. Purchased furniture on account from Backyard Furniture Mfg., $1,869.35. Purchase Invoice No. 675.

4. © 2015 Cengage Learning. All Rights Reserved. Posting the Totals of a Purchases Journal LO5 Lesson 1-2 SLIDE 4 © 2015 Cengage Learning. All Rights Reserved. Date Journal Page Number 1 1 2 2 Column Total Account Number Account Balance 5 5 4 4 3 3

5. © 2015 Cengage Learning. All Rights Reserved. Journalizing Purchase Returns and Allowances LO6 Lesson 1-2 SLIDE 5 © 2015 Cengage Learning. All Rights Reserved. When merchandise is returned to a vendor, the vendor’s account and Accounts Payable are reduced by a debit. An account that reduces a related account on a financial statement is called a contra account. Purchases Returns and Allowances is a contra account to the purchases account.

6. © 2015 Cengage Learning. All Rights Reserved. Debit Memorandum ●A form prepared by the customer showing the price deduction taken by the customer for a return or an allowance is called a debit memorandum. LO6 Lesson 1-2 SLIDE 6 © 2015 Cengage Learning. All Rights Reserved.

7. Lesson 1-2 Audit Your Understanding 1.When Whiley’s grills department purchases merchandise on account, which general ledger accounts are affected, and how? SLIDE 7 ANSWER Purchases—Grills is debited; Accounts Payable is credited. Lesson 1-2 © 2015 Cengage Learning. All Rights Reserved.

8. Lesson 1-2 Audit Your Understanding 2.Which general ledger accounts are affected, and how, by a return of furniture department merchandise? ANSWER Accounts Payable is debited; Purchases Returns and Allowances—Furniture is credited. Lesson 1-2 © 2015 Cengage Learning. All Rights Reserved.