1. Journalizing Purchases and Cash Payments
Chapter 9
Journalizing Purchases and Cash Payments

2. 9.1 Corporations
Corporation – an organization with the legal rights of a person and which many people may own
Share of stock – each unit of ownership in a corporation
Capital stock– total shares of ownership in a corporation
Stockholder – an owner of one or more shares of a corporation

3. Purchases & purchases journal
Merchandise – goods that a business purchases to sell
Merchandising business – a business that purchases and sells goods
Retail merchandising business – sells to those who use or consume the goods
Wholesale merchandising business – buys and resells merchandise to retail merchandising businesses

4. Purchases & purchases journal
Cost of merchandise – price a business pays for goods it purchases to sell
Markup – the amount added to the cost of merchandise to establish the selling price
Vendor – a business from which merchandise is purchased or supplies or other assets are bought

5. Purchases & purchases journal
Special journal – a journal used to record only one kind of transaction
Five journals we will use:
1. Purchases
2. Cash Payments
3. Sales
4. Cash Receipts
5. General

6. Purchases & purchases journal
Purchases journal – special journal
used to record only purchases of
merchandise on account
Purchase on account – a transaction
in which the merchandise purchased is
to be paid for later
Classified as a cost account (5110)

7. Purchases & purchases journal
Special amount column – a journal amount column headed with an account title
Accounting concept: Historical Cost – when the actual amount paid for the merchandise or other items bought is recorded

8. PURCHASE INVOICE
page 238 1 4 2 3
1. Stamp the date received and purchase invoice number.
3. Initials of the person who checked the invoice.
2. Place a check mark by each amount.
4. Review the vendor’s terms.
LESSON 9-1

9. Purchases & purchases journal
Purchase invoice (P) – an invoice used as a source document for recording a purchase on account transaction
Terms of sale – an agreement between a
buyer and a seller about payment for
merchandise
Ex: 30 days
Ex: 2/10; n/30

10. PURCHASING MERCHANDISE ON ACCOUNT
page 239
November 2. Purchased merchandise on account from Crown Distributing, $2, Purchase Invoice No. 83. 2 1 3 4
1. Write the date.
2. Write the vendor name.
3. Write the purchase invoice number.
4. Write the amount of the invoice.
LESSON 9-1

11. TOTALING AND RULING A PURCHASES JOURNAL
page 240 1 4 5 3 2 6
1. Rule a single line across the amount column.
4. Add the amount column.
5. Write the total.
2. Write the date.
6. Rule double lines across the amount column.
3. Write the word Total.
LESSON 9-1

12. 9.2 Cash payments journal
Cash payments journal – 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
Purchases discount – a cash discount on purchases taken by a customer

13. Cash payments journal
General amount column – journal amount column that is NOT headed with an account title

14. CASH PAYMENT OF AN EXPENSE
page 243
November 2. Paid cash for advertising, $ Check No. 292. 1 2 3 4 5
1. Write the date.
2. Write the account title.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
LESSON 9-2

15. BUYING SUPPLIES FOR CASH
LESSON 9-2
2/21/2019
BUYING SUPPLIES FOR CASH
page 243
November 5. Paid cash for office supplies, $ Check No. 293. 1 2 3 4 5
1. Write the date.
2. Write the account title.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
LESSON 9-2

16. CASH PAYMENTS FOR PURCHASES
page 244
November 7. Purchased merchandise for cash, $ Check No. 301. 2 1 3 4 5
1. Write the date.
2. Write the account title.
3. Write the check number.
4. Write the debit amount.
5. Write the credit amount.
LESSON 9-2

17. Cash payments journal
List price – the retail price listed in a catalog or on an Internet site
Trade discount – a reduction in the list price granted to customers
*Note: No journal entry is made to show the amount of a trade discount
Ex: List price $1,500 less 20% discount

18. Cash payments journal Cash discount examples: terms of sale 2/15; n/30
Contra account – an account that reduces a related account on a financial statement
Normal balance

19. 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. 5 6 1 2 4 3
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.
6. Write the credit amount.
LESSON 9-2

20. 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 2 4 5 3
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.
LESSON 9-2

21. 9.3 Cash payments journal
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 a recorded
amount

22. PETTY CASH REPORT 1. Write the date and custodian name. 1
LESSON 9-3
2/21/2019
PETTY CASH REPORT
page 248
1. Write the date and custodian name. 1
2. Write the fund total.
3. Summarize petty cash payments. 2 3
4. Calculate and write the total payments. 4
5. Calculate and write the recorded amount on hand. 5 6 7 8
6. Write the actual amount of cash 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.
LESSON 9-3
Blue

23. REPLENISHING A PETTY CASH FUND
LESSON 9-3
2/21/2019
REPLENISHING A PETTY CASH FUND
page 249
1. Date
2. Account titles
3. Check number
4. Expense amounts
5. Cash short as a debit; cash over as a credit
6. Total cash payment 4 5 6 1 3 2
LESSON 9-3
Blue

24. TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL PAGE TO CARRY TOTALS FORWARD1 4 2 3 5 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.
LESSON 9-3

25. STARTING A NEW CASH PAYMENTS JOURNAL PAGE
LESSON 9-3
2/21/2019
STARTING A NEW CASH PAYMENTS JOURNAL PAGE
page 251 1 5 2 3 4
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.
LESSON 9-3
Blue

26. LESSON 9-3
2/21/2019
TOTALING, PROVING, AND RULING A CASH PAYMENTS JOURNAL AT THE END OF A MONTH
page 252 1 2 3 4 5
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.
LESSON 9-3
Blue

27. 9.4 General journal

28. BUYING SUPPLIES ON ACCOUNT
LESSON 9-4
2/21/2019
BUYING SUPPLIES ON ACCOUNT
page 255
November 6. Bought store supplies on account from Gulf Craft Supply, $ Memorandum No. 52. 2 4 3 7 1 6 5
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.
4. Write the debit amount.
7. Write the credit amount.
LESSON 9-4
Blue

29. 28. General journal
Purchases return – credit allowed for the purchase price of returned merchandise resulting in a decrease in the customer’s accounts payable
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
Debit memorandum (DM) – form prepared by the customer showing the price deduction taken by the customer for returns and allowances

30. DEBIT MEMORANDUM FOR PURCHASES RETURNS AND ALLOWANCES
page 256
LESSON 9-4

31. JOURNALIZING PURCHASES RETURNS AND ALLOWANCES
page 257
November 28. Returned merchandise to Crown Distributing, $252.00, covering Purchase Invoice No. 80. Debit Memorandum No. 78. 2 5 1 3 4 6 7
1. Write the date.
4. Write debit memorandum number.
2. Write the account title and vendor name.
5. Write the amount.
6. Write Purchases Returns and Allow.
3. Place a diagonal line in the Post. Ref. column.
7. Write the amount.
LESSON 9-4