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Glencoe Accounting

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Time for Any Question
Glencoe Accounting

4. List the operating cycle for a merchandising business.
Question 1
List the operating cycle for a merchandising business.
Collect cash from accounts.
Pay expenses.
Sell goods for cash (skip to step 4).
Sell goods on account.
Purchase goods for resale
Glencoe Accounting

5. List the operating cycle for a merchandising business.
Question 1
List the operating cycle for a merchandising business.
Step 1: Purchase goods for resale
Step 2a: Sell goods for cash (skip to step 4).
Step 2b: Sell goods on account.
Step 3: Collect cash from accounts.
Step 4: Pay expenses.
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6. $1,800.00 $18.00 $1,782.00 Credit Credit Debit Debit Question 2
A customer bought merchandise on February 1 totaling $1, As an incentive to get this customer to pay early, you offer terms of 1/20, n/30. The customer pays on February 15. Calculate the following:
Total sale amount __________
Amount of discount __________
Net cash received __________
Now indicate whether you would debit or credit the following accounts.
Accounts Receivable __________
Customer’s subsidiary account __________
Sales Discounts __________
Cash in Bank __________
$1,800.00
$18.00
$1,782.00
Credit
Credit
Debit
Debit
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7. YOUR course WORKS
Home work Group 1: Chapters; 1 – 2 – 11 – 12 – 13 and 14, Last day is 3/19/2017, for 50 Points each. [6 X 50 = 300 Points]
Home work Group 2: Chapters; 15 – 18 – 20 – 22 – 23 – 25 and 29, Last day is 5/7/2017, for 50 Points each . [7 X 50 = 350 Points]
EXAMS: # 1 Due 1/31, for 65 Points – MID TERM 3/23, for 90 Points – # 2 Due 4/12, for 65 Points – FINAL Due 5/8 , for 90 Points. [ = 310 Points]
Case Study: # 1 Due 1/31 – # 2 Due 2/14 - # 3 Due 3/2 – # 4 Due 3/27 - # 5 Due 4/10 – # 6 Due 4/26 – # 7 Due 5/4, for 5 Points each. [7 X 5 = 35 Points]
Glencoe Accounting

8. Merchandising businesses follow an orderly process for purchasing merchandise, supplies, and equipment. The accounting department is responsible for making the cash payments for the business. Individual accounts payable transactions are posted to a subsidiary ledger.
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

9. Explain the procedures for processing a purchase on account.
Describe the accounts used in the purchasing accounts.
Analyze transactions relating to the purchase of merchandise.
Record a variety of purchases and cash payments.
Post to the accounts payable subsidiary ledger.
Identify controls over cash.
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

10. Key Terms # 1 P - 11 To 18 purchase requisition purchase order
Purchasing Items Needed by a Business
Section 15.1
Key Terms # 1 P - 11 To 18
purchase requisition
purchase order
packing slip
processing stamp
purchases discount
discount period
Purchases account
cost of merchandise
Glencoe Accounting

11. The Purchasing Process
Purchasing Items Needed by a Business
Section 15.1
Requesting needed items
The purchase of
supplies, equipment, and merchandise is divided into four stages:
Ordering from a supplier
Verifying items received
Processing the supplier’s invoice
Glencoe Accounting

12. The Purchasing Process
Purchasing Items Needed by a Business
Section 15.1
1) Purchase Requisition
See page 420
purchase requisition
A written request that a specified item or items be ordered.
Glencoe Accounting

13. The Purchasing Process
Purchasing Items Needed by a Business
Section 15.1
Contents of the Purchase Order Include:
Quantity
Description
2) purchase order
A written offer to a supplier to buy specified items.
Unit price
Total cost
Supplier’s name and address
Date needed
Shipping method (optional)
Glencoe Accounting

14. The Purchasing Process
Purchasing Items Needed by a Business
Section 15.1
The buyer unpacks and checks the contents against the packing slip.
Verifying Items 3) Received
When a shipment arrives:
The buyer reports discrepancies to the accounting department.
packing slip
A form that lists the items included in the shipment.
Glencoe Accounting

15. The Purchasing Process
Purchasing Items Needed by a Business
Section 15.1
4) Processing the Supplier’s Invoice
The supplier sends an invoice, or bill, to the buyer.
The accounting department checks the invoice against the packing slip and purchase order.
If there are no discrepancies, a processing stamp is placed on the invoice.
processing stamp
A stamp placed on a creditor’s invoice that outlines the steps to be followed in processing the invoice for payment.
Glencoe Accounting

16. The Purchasing Process
Purchasing Items Needed by a Business
Section 15.1
Processing the Supplier’s Invoice
See page 422
Glencoe Accounting

17. The Purchasing Process
Purchasing Items Needed by a Business
Section 15.1
Purchases Discount
Two Types of Discounts:
Discount Period
purchases discount
The buyer’s cash discount for early payment of an invoice on account.
discount period
The period of time within which an invoice must be paid if a discount is to be taken.
Glencoe Accounting

18. The actual cost to the business of the merchandise sold to customers.
The Purchases Account
Purchasing Items Needed by a Business
Section 15.1
Merchandise bought to sell to customers is recorded in the Purchases account, a temporary account that is classified as a cost of merchandise account.
Purchases account
The account used to record the cost of merchandise purchased during a period.
cost of merchandise
The actual cost to the business of the merchandise sold to customers.
Glencoe Accounting

19. Key Terms # 2 P - 20 To 31 Accounts payable subsidiary ledger
Analyzing and Recording Purchases on Account
Section 15.2
Key Terms # 2 P - 20 To 31
Accounts payable subsidiary ledger
Tickler file
Due date
Purchases return
Purchases allowance
Debit memorandum
Glencoe Accounting

20. Purchases of Assets on Account
Analyzing and Recording Purchases on Account
Section 15.2
The most important thing a retail business purchases is merchandise to resell.
Merchandise can be bought on a cash basis or on account.
Glencoe Accounting

21. Purchases of Assets on Account
Analyzing and Recording Purchases on Account
Section 15.2
The Accounts Payable Subsidiary Ledger Form
See page 424
accounts payable subsidiary ledger
A separate ledger that contains accounts for all creditors; it is summarized in the Accounts Payable controlling account in the general ledger.
Glencoe Accounting

22. Purchases of Assets on Account
Analyzing and Recording Purchases on Account
Section 15.2
When a purchase of merchandise on account is recorded, a diagonal line is entered in the Posting Reference column to indicate the credit amount is posted in two places:
The Accounts Payable controlling account
The individual account in the accounts payable subsidiary ledger
Glencoe Accounting

23. Purchases of Assets on Account
Analyzing and Recording Purchases on Account
Section 15.2
After an invoice is journalized, it is put in a Tickler file according to its Due date.
Tickler file
A file that contains a folder for each day of the month into which invoices are placed according to their due dates.
Due date
The date by which an invoice must be paid.
Glencoe Accounting

24. Purchases of Assets on Account
Analyzing and Recording Purchases on Account
Section 15.2
Business Transaction
On December 14 The Starting Line purchased $2,300 in merchandise on account from Pro Runner Warehouse, Invoice 7894.
See pages 425–426
Glencoe Accounting

25. Purchases of Assets on Account
Analyzing and Recording Purchases on Account
Section 15.2
Business Transaction
On December 15 The Starting Line received Invoice 3417, dated December 13, from Champion Store Supply for store equipment bought on account for $1,200, terms n/30.
See pages 426–427
Glencoe Accounting

26. Purchases Returns and Allowances
Analyzing and Recording Purchases on Account
Section 15.2
Purchases Return
Occasionally, a business buys merchandise that, upon inspection, is unacceptable.
purchases return
The return of merchandise bought on account to the supplier for full credit.
Glencoe Accounting

27. Purchases Returns and Allowances
Analyzing and Recording Purchases on Account
Section 15.2
Purchases Return
Occasionally, a business buys merchandise that, upon inspection, is unacceptable.
Purchases Allowance
purchases allowance
A price reduction given when a business keeps unsatisfactory merchandise it has bought.
Glencoe Accounting

28. Purchases Returns and Allowances
Analyzing and Recording Purchases on Account
Section 15.2
Purchases Return
Occasionally, a business buys merchandise that, upon inspection, is unacceptable.
Purchases Allowance
Debit Memorandum
debit memorandum
The form a business uses to notify its suppliers (creditors) of a return or to request an allowance.
Glencoe Accounting

29. Purchases Returns and Allowances
Analyzing and Recording Purchases on Account
Section 15.2
See page 427
Glencoe Accounting

30. Purchases Returns and Allowances
Analyzing and Recording Purchases on Account
Section 15.2
Business Transaction
On December 16 The Starting Line issued Debit Memorandum 51 for the return of $200 in merchandise purchased on account from FastLane Athletics.
See page 428
Glencoe Accounting

31. Purchases Returns and Allowances
Analyzing and Recording Purchases on Account
Section 15.2
Posting to General Ledger Accounts Payable Subsidiary Ledger
See page 429
Glencoe Accounting

32. Key Terms # 3 P - 33 To 39 premium FOB destination FOB shipping point
Analyzing and Recording Cash Payments
Section 15.3
Key Terms # 3 P - 33 To 39
premium
FOB destination
FOB shipping point
bankcard fee
Glencoe Accounting

33. Controls over Cash How Businesses Can Manage Cash Payments
Analyzing and Recording Cash Payments
Section 15.3
How Businesses Can Manage Cash Payments
Require proper authorization of all cash payments.
Write checks for all payments.
Use prenumbered checks.
Retain and account for voided checks.
Glencoe Accounting

34. Cash Payment Transactions
Analyzing and Recording Cash Payments
Section 15.3
An insurance premium is paid at the beginning of the covered period and is recorded in the Prepaid Insurance asset account.
premium
The amount paid for insurance.
Glencoe Accounting

35. Cash Payment Transactions
Analyzing and Recording Cash Payments
Section 15.3
Business Transaction
On December 19 The Starting Line purchased merchandise from FastLane Athletics for $1,300, Check 1002.
See page 433
Glencoe Accounting

36. Cash Payment Transactions
Analyzing and Recording Cash Payments
Section 15.3
Recording Cash Payments for Items Purchased on Account
See page 433
Glencoe Accounting

37. Cash Payment Transactions
Analyzing and Recording Cash Payments
Section 15.3
FOB destination
Shipping terms are stated as
FOB shipping point
FOB destination
Shipping term specifying that the supplier pays the shipping cost to the buyer’s destination.
FOB shipping point
Shipping term specifying that the buyer pays the shipping charge from the supplier’s shipping point.
Glencoe Accounting

38. Cash Payment Transactions
Analyzing and Recording Cash Payments
Section 15.3
Business Transaction
On December 24, The Starting Line issued Check 1004 for $275 to Dara’s Delivery Service for shipping charges on merchandise purchased from Sports Link Footwear.
See page 435
Glencoe Accounting

39. Cash Payment Transactions
Analyzing and Recording Cash Payments
Section 15.3
Banks charge a bankcard fee for handling bankcard sales slips.
Business Transaction
On December 31 The Starting Line records the bankcard fee of $75, December bank statement.
bankcard fee
A fee charged for handling bankcard sales slips; usually based on the total amounts recorded on the sales slips processed.
See page 435
Glencoe Accounting

40. 1. Requesting needed items
Question 1
From the four choices below, select the form that is related to each step in the purchasing process.
purchase order
packing slip
processing stamp
purchase requisition
1. Requesting needed items
2. Ordering from the supplier ___________________
3. Verifying items received ___________________
4. Processing supplier’s invoice ___________________
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41. Question 2
If you ordered merchandise from a vendor in New York City and the terms stated “FOB Chicago” and your company is in Denver, what would that mean?
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42. Question 3
Your business received an invoice dated February 5 totaling $2, The vendor has offered the terms of 2/10, n/30. You pay on February 15. Calculate the following:
total amount of purchase __________
amount of discount __________
amount of check __________
Now indicate whether you would debit or credit the following accounts.
Accounts Payable __________
Vendor’s subsidiary account __________
Purchases Discounts __________
Cash in Bank __________
Glencoe Accounting

43. Thank you and See You On Friday at the Same Time, Take Care
Glencoe Accounting