1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 9-2 Journalizing Cash Payments Using a Cash Payments Journal

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 9-2 CASH PAYMENTS JOURNAL page 242 Cash Payments Journal—special journal used to record cash payment transactions ONLY! General Amount Columns—generic amount columns not headed with special account titles. General DR/CR. Cash Discount—A deduction the vendor allows from the regular invoice amount to encourage prompt payment. “Pay Early—Pay Less” Purchases Discount—A cash discount on Purchases bought from a vendor. Lowers your CASH payment amount.

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 9-2 CASH PAYMENT OF AN EXPENSE page 243 November 2. Paid cash for advertising, $150.00. Check No. 292. NOW TAKES ONE LINE TO RECORD INSTEAD OF TWO!!! 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

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 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 NOW TAKES ONE LINE TO RECORD INSTEAD OF TWO!!!

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 9-2 CASH PAYMENTS FOR PURCHASES page 244 November 7. Purchased merchandise for cash, $600.00. Check No. 301. Note: Although it says purchased merchandise the account name is PURCHASES! 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

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Price Options List Price—The FULL retail price listed in most catalogs or websites or on stickers or tags. Also called MSRP or Manufacturer's Suggested Retail Price. Trade Discounts—a reduction in the list price granted from major vendors to regular customers. Sometimes based upon quantities ordered. Invoice Amount—the amount due AFTER the trade discount has been deducted from the list price. Only the INVOICE AMOUNT is used in the journal entry. 6 LESSON 9-2

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Payment Options Cash Discount stated as a percentage deducted from the invoice amount Ex: 2/10, n/30 (commonly used) Two ten, net thirty Two Ten = 2% of total may be discounted IF paid within 10 days OR Net thirty = the Total invoice amount must be paid in 30 days Contra Account—an account that reduces a related account on a financial statement. “Purchases Discount” is a contra to Purchases. Captured separately and have balances OPPOSITE their related account!!!!! 7 LESSON 9-2

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 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

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 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

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 9-2 TERMS REVIEW cash payments journal cash discount purchases discount general amount column list price trade discount contra account page 247

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Audit Your Understanding 1.Why would a vendor offer a cash discount to a customer? 2.What is recorded in the general amount columns of a cash payments journal? 3.What is the difference between purchasing merchandise and buying supplies? 4.What is meant by terms 2/10,n/30? 11 LESSON 9-2