1. Today’s Target!  Tues., Jan. 5 th  Students will demonstrate accounting practices for a full accounting cycle Agenda – Welcome Back!!! –Finish Final Exam (take out any notes) –Read and take notes on Chapter 9 until all are done with Final –Finish playing Monopoly when all in your group are done –Finish fiscal period papers for Monopoly transactions Guiding Question:  “Why do we have fiscal periods?”

2. Today’s Target!  Thurs., Jan. 7 th  Students will demonstrate accounting practices for a full accounting cycle Agenda –Class survey –Finish fiscal period papers for Monopoly transactions –Chapter 9 Guiding Question:  “Why do we have fiscal periods?”

3. Today’s Target!  Mon., Jan 11 th  Students will demonstrate accounting practices for a full accounting cycle Agenda –Class survey –Finish fiscal period papers for Monopoly transactions –Chapter 9 Guiding Question:  “Why do we have fiscal periods?”

4. Month End 1.Write yourself a check for $125 as drawing 2.Post from the journal to the ledger 3.Prepare a worksheet Prepare a trial balance Plan adjusting entries to reduce prepaid insurance by $10 and supplies by $5 Extend the balance sheet and income statement Calculate and record net income/loss Don’t forget to total each column to make sure debits equal credits 4.Prepare the income statement and balance sheet 5.Record the adjusting entries in the journal and post to the ledger 6.Record closing entries (see textbook pgs. 206-211) Closing entries for income statement accounts Closing entry to record net income or loss and close to the capital account and close the income summary account Closing entry for the owner’s drawing account 7.Prepare a post-closing trial balance

5. Today’s Target!  Wed., Jan. 13 th  Students will demonstrate accounting practices for a full accounting cycle Agenda –Turn in Monopoly Papers –Chapter 9 Quick lecture Completion Goal: –9-1 – WT/OYO –9-1 – Application (graded) –9-2 – WT/OYO –9-2 – Application (graded) Guiding Question:  “Why do we have fiscal periods?”

6. Independent Study? n With the varied groups and schedules would you be interested in an Independent Study format for Accounting n Each student would get a schedule with due dates –Missed due dates count as late work unless excused n Lectures on materials given intermittently n Individual help as need as always n All note sheets for chapter would have to be completed to take the tests n 3 Grade requests per graded assignment only n Notes COULD be used on all graded work assignments

7. n Corporation – an organization with the legal rights of a person and which many persons may own –A corporation is formed by receiving approval from a state or federal agency n Share of stock – each unit of ownership in a corporation n Capital stock – total shares of ownership in a corporation n Stockholder – an owner of one or more shares of a corporation Business Structures

8. n Merchandise – goods that a merchandising business purchases to sell n Merchandising business – purchases and sells to those who use or consume the goods n Retail merchandising business – merchandising business that sells to those who use or consume the goods n Wholesale merchandising business – buys and sells merchandise to retail merchandising business Merchandising Businesses

9. I. The Business: Hobby Shack n Retail Merchandising business organized as a corporation with founder, Janice Kellogg n Hobby Shack sells a wide variety of art and hobby supplies to individuals, schools and businesses n Janice plans to expand the merchandise, rent store and office equipment, and employ other individuals to work n Janice did not personally have the capital to implement her business plan –With help of small group of investors, formed a corp –Each stockholder received a number of shares based on the amount invested n Expects to continue in business indefinitely (Going Concern accounting concept)

10. II. Using Special Journals n A business with a limited number of daily transactions may record all entries in one journal n A business with many transactions may choose to use a separate journal for each kind of transaction n Special journal – used to record only one kind of transaction

11. II. Using Special Journals n Hobby Shack uses five journals to record daily transactions: 1.Purchases journal – for all purchases of merchandise on account 2.Cash payments journal – for all cash payments 3.Sales journal – for all sales of merchandise on account 4.Cash receipts journal – for all cash receipts 5.General journal – for all other transactions

12. III. Purchasing Merchandise n Cost of merchandise – price a business pays for goods it purchases to sell n Markup – amount added to the cost of merchandise to establish the selling price n Revenue earned from a sale includes both the cost of merchandise and markup –Only the markup increases the capital n Accounts for the cost of merchandise are kept in a separate division of the general ledger n Merchandise division within chart of accounts (p.231)

13. III. Purchasing Merchandise n Vendor – business from which merchandise is purchased or supplies or other assets are bought n “Purchases” - Account used for recording the cost of merchandise –Cost account –Temporary account n Because the cost of merchandise reduces capital when purchased, “Purchases” has a normal debit balance

14. III. Purchasing Merchandise Decrease Increase DebitCredit Purchases

15. IV. Purchases on Account n The cost account, “Purchases,” is only used to record the cost of merchandise purchased on account n ALL other items bought, such as supplies, are not recorded in the purchases account n Accounting concept: Historical Cost – when the actual amount paid for merchandise or other items bought is recorded n Purchase on Account - Transaction in which the merchandise purchased is to be paid for later

16. IV. Purchases on Account Decrease Increase DebitCredit Accounts Payable

17. IV. PURCHASES JOURNAL n Purchases journal – special journal used to record only purchases of merchandise on account n Recorded on only one line n Special amount column – a journal amount column headed with an account title –Used for frequently occurring transactions –Eliminates writing general ledger account titles & saves time Lesson 10-1, page 224

18. V. Purchase Invoice n Invoice – form describing the goods sold, the quantity, and the price n Purchase invoice – invoice used as a source document for recording a purchase on account transaction (objective evidence) n Terms of sale – agreement between a buyer and a seller about payment for merchandise

19. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 19 LESSON 9-1 2 1.Stamp the date received and purchase invoice number. PURCHASE INVOICE 1 3 4 page 238 4.Review the vendor’s terms. 3.Initials of the person who checked the invoice. 2.Place a check mark by each amount.

20. VI. PURCHASING MERCHANDISE ON ACCOUNT November 2. Purchased merchandise on account from Crown Ltd., $2,039.99. Purchase Invoice No. 83. 1.Which accounts are affected? Purchases Accounts Payable 4.How is each amount entered in the accounts? Costs increase on the debit side. Liabilities increase on the credit side. 3.How is each classification changed? Costs are increased. Liabilities are increased. 2.How is each account classified? Purchases is a cost account. Accounts Payable is a liability account. Debit Normal Balance Credit Normal Balance  2,039.00  Accounts Payable Purchases

21. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 21 LESSON 9-1 PURCHASING MERCHANDISE ON ACCOUNT 1 2 34 page 239 November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83. 1.Write the date. 2.Write the vendor name. 3.Write the purchase invoice number. 4.Write the amount of the invoice.

22. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 22 LESSON 9-1 TOTALING AND RULING A PURCHASES JOURNAL 2 3 45 page 240 1 6 1.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. Always done at the end of each month!

23. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH PAYMENTS JOURNAL Cash payments journal – special journal used to record only cash payment transactions Used for frequent cash payments Include only columns needed to record cash transactions General amount column – journal amount column that is NOT headed with an account title Transactions that do not occur often ALL cash payments by Hobby Shack are recorded here Lesson 10-2, page 229

24. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH PAYMENTS JOURNAL Cash Discount – deduction that a vendor allows on the invoice amount to encourage prompt payment Encourages early payments Purchases Discount – a cash discount on purchases taken by a customer When a purchases discount is taken, the customer pays less than the invoice amount previously recorded in the purchases account Taking purchases discount reduces the customer’s cost of merchandise purchased

25. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 25 LESSON 9-2 CASH PAYMENT OF AN EXPENSE page 243 November 2. Paid cash for advertising, $150.00. Check No. 292. 1.Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 12345

26. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 26 LESSON 9-2 BUYING SUPPLIES FOR CASH page 243 November 5. Paid cash for office supplies, $94.00. Check No. 293. 1.Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 12345

27. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Trade Discount 27 LESSON 9-2 Most manufacturers & wholesalers print catalogs and maintain Internet sites that describe products The prices listed are the manufacturers’ suggested retail prices List price – retail price listed in a catalog or on an Internet site When a merchandising business purchases a number of products from a manufacturer, the price frequently is quoted as “list price less trade discount” Trade discount – reduction in the list price granted to customers Also used to quote different prices for different quantities

28. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH PURCHASES 28 LESSON 9-2 The list price for the 10 ceramic molds is $1,500 The invoice price is the list price, less a 60% trade discount STEP 1 Total List Price XTrade Discount =Trade Discount $1,50060%$900 STEP 2 Total List Price ---Trade Discount =Invoice Amount $1,500$900$600

29. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 29 LESSON 9-2 CASH PAYMENTS FOR PURCHASES page 244 November 7. Purchased merchandise for cash, $600.00. Check No. 301. 1.Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 1 2 345

30. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH DISCOUNTS 30 LESSON 9-2 A cash discount is stated as a percentage deducted from the invoice amount Example: 2/10, n/30 is a common term of sale, which is read two ten, net thirty Two ten means 2% of the invoice amount may be deducted if the invoice is paid within 10 days of the invoice date Net thirty means that the total invoice amount must be paid within 30 days

31. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH DISCOUNTS 31 LESSON 9-2 Purchases discounts are recorded in a general ledger account titled Purchases Discount Contra account – account that reduces a related account on a financial statement Purchases Discount is a contra account to Purchases On an income statement, Purchases Discount is deducted from the balance of its related account, Purchases Since contra accounts are deductions from their related accounts, their normal balances are opposite of related account

32. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH DISCOUNTS 32 LESSON 9-2 STEP 1 Purchase Invoice Amount Purchases Discount $498 X 2% = $9.96 STEP 2 Purchase Invoice Amount Purchases Discount Cash Amount After Discount $498 ---$9.96 = $488.04 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.

33. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 33 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. 302. 1.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. 12 3 4 6.Write the credit amount. 65

34. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 34 LESSON 9-2 CASH PAYMENTS ON ACCOUNT WITHOUT PURCHASES DISCOUNTS page 246 November 13. Paid cash on account to American Paint, $2,650.00, covering Purchase Invoice No. 77. Check No. 303. 1.Write the date. 2.Write the vendor account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 12 3 45

35. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Today’s Target!  Fri., Jan. 15 th  Students will demonstrate accounting practices for a full accounting cycle Agenda Turn in Monopoly Papers Chapter 9 Quick lectur9-3 & 9-4 Lecture Completion Goal: 9-3 WT/OYO 9-3 Application (graded) 9-4 WT/OTY 9-4 Application (graded) Chapter 9 Study Guide Chapter 9 Test A Chapter 9 Test by end of class Friday 1/22/16 (see me to take test) Guiding Question:  “Why do we have fiscal periods?”

36. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Today’s Target!  Wed., Jan. 20 th  Students will demonstrate accounting practices for a full accounting cycle Agenda Turn in Monopoly Papers Chapter 9 Quick lectur9-3 & 9-4 Lecture Completion Goal: 9-3 WT/OYO 9-3 Application (graded) 9-4 WT/OTY 9-4 Application (graded) Chapter 9 Study Guide Chapter 9 Test A Chapter 9 Test B by end of class Friday 1/22/16 (see me to take test) Guiding Question:  “Why do we have fiscal periods?”

37. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Performing Additional Cash Payments Journal Operations Petty cash fund enables a business to pay cash for small expenses without writing a check Errors may be made when making payments from a petty cash fund These errors cause a difference between actual cash on hand and the record of the amount of cash that should be on hand Cash short – petty cash on hand amount that is less than a recorded amount Cash over – petty cash on hand amount that is more than recorded 37 LESSON 9-3

38. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning New account: Cash Short and Over Temporary account (closed to income summary) Balance can either be a debit or credit Usually a debit More likely to be short than over Cash shortage adds to the cost of operating a business (Operating Expense) 38 LESSON 9-3 Performing Additional Cash Payments Journal Operations

39. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 39 LESSON 9-3 PETTY CASH REPORT 2 page 248 6.Write the actual amount of cash on hand. 8 4 1 3 6 5 7 1.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.

40. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 40 LESSON 9-3 REPLENISHING A PETTY CASH FUND 56 page 249 1.Date 2.Account titles 3.Check number 4.Expense amounts 5.Cash short as a debit; cash over as a credit 1 2 3 4 6.Total cash payment Pg. 249

41. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning A journal is proved and ruled whenever a journal page is filled and always at the end of a month After a journal page has been totaled and proved, the journal is ruled in preparation for forwarding to the next page Totals are carried forward to the next journal page At the end of the month, equality of debits and credits is proved and the journal is ruled 41 LESSON 9-3 TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL

42. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 42 LESSON 9-3 TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL PAGE TO CARRY TOTALS FORWARD 23 4 5 page 250 1 6 1.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.

43. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 43 LESSON 9-3 STARTING A NEW CASH PAYMENTS JOURNAL PAGE 1 234 page 251 1.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

44. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 44 LESSON 9-3 TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL AT THE END OF A MONTH 2 3 4 page 252 1.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

45. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Journalizing Other Transaction Using a General Journal Transactions that cannot be recorded in a special journal are recorded in a general journal When Hobby Shack buys store supplies on account, an invoice is received from the vendor To avoid mistakes, a memorandum is attached to the invoice, noting that the invoice is for store supplies and not for purchases 45 LESSON 9-3

46. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 46 LESSON 9-4 MEMORANDUM FOR BUYING SUPPLIES ON ACCOUNT page 254

47. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 47 LESSON 9-4 BUYING SUPPLIES ON ACCOUNT 1 2 3 4 5 6 page 255 November 6. Bought store supplies on account from Gulf Craft Supply, $210.00. Memorandum No. 52. 1.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

48. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Debit Memorandum for Purchases Returns and Allowances A customer may not want to keep merchandise that is inferior in quality or damaged when received May be allowed to return part or all of the merchandise Purchases return – credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer’s accounts payable When merchandise is damaged but still usable or is of a different quality than ordered, the vendor may let the customer keep the merchandise at a reduced price Purchases allowance – credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer’s accounts payable 48 LESSON 9-3

49. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning A purchases return or allowance should be confirmed in writing Debit memorandum – A form prepared by the customer showing the price deduction taken by the customer for returns and allowances The customer records the amount as a debit (deduction) to the vendor account to show the decrease in the amount owed Hobby Shack issues a debit memo for each purchases return or allowance (source document) The original memo is sent to the vendor; Hobby Shack keeps a copy The Purchases Returns and Allowances account enables a business to evaluate effectiveness of purchasing 49 LESSON 9-3 Debit Memorandum for Purchases Returns and Allowances

50. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 50 LESSON 9-4 DEBIT MEMORANDUM FOR PURCHASES RETURNS AND ALLOWANCES page 256

51. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Journalizing Purchases Returns and Allowances Purchases returns and allowances decrease the amount of purchases Purchases Returns and Allowances is a contra account to Purchases Normal account balance is a credit 51 LESSON 9-3

52. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 52 LESSON 9-4 4. Write debit memorandum number. November 28. Returned merchandise to Crown Distributing, $252.00, covering Purchase Invoice No. 80. Debit Memorandum No. 78. JOURNALIZING PURCHASES RETURNS AND ALLOWANCES page 257 1 2 3 4 5 6 1.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