1. Chapter 18

2. Corporation Has many owners Each owner is called a stock holder
Each stockholder owns a share of stock

3. Special Journal
Because things are more confusing to a corporation we have to spread things out to make it easier to understand.
We use 5 separate journals to help record
Purchases
Cash Payments
Sales
Cash Receipts

4. Posting to the Journals
Did I post a transaction in either a General Amount Column, or a Accounts Payable/Receivable Column
Yes – post those numbers to the account in the account title
No – go on to the next transaction
Did I post a transaction in a special amount column
Yes – post the totals of those accounts at the end of the month

5. Purchased merchandise on account from Pro golf company $7254. 00
Purchased merchandise on account from Pro golf company $ Purchase Invoice No. 179
Purchases Journal
Date
Account Credited
Purch No.
Post Ref
Purch Dr. Accts Pay Cr
2-Mar
Pro Golf Company
179
7254

6. Review of Posting
We post any account that falls in the accounts Rec./ Pay or in the general individually.
Purchases Journal
Date
Account Credited
Purch No.
Post Ref
Purch Dr. Accts Pay Cr
2-Mar
Pro Golf Company
179
7254
Accounts Payable Ledger
Vendor Pro Golf Company
Vendor No. 260
Date
Item
Post Ref
Debit
Credit
Credit Bal
1-Mar
Balance
3681
2-Mar P3
7254
10935

7. At the end of the month We have to post all special amount columns
General Ledger Accounts
Account Purchases
Account No 5105
Balance
Date
Item
Post Ref
Debit
Credit
16-Mar
cp6
240
72614
31-Mar p3
42672
115286
We have to post all special amount columns
Purchases Journal
Date
Account Credited
Purch No.
Post Ref
Purch Dr. Accts Pay Cr.
2-Mar
Pro Golf Company
179
7254
31-Mar
Raffo Company
201
270
3710
totals
42672
General Ledger Accounts
Account Accounts Payable
Account No 2115
Balance
Date
Item
Post Ref
Debit
Credit
29-Mar g4
120
24007
31-Mar p3
42672
66679
(5105) (2115)

8. Trade Discount
List Price – a price that shows up in a catalog or what you see on a price tag in a store
Trade Discount – a reduction in the list price granted to customers

9. What if we have a discount applied to the purchase?
Total List Price x Trade Discount Rate = Trade Discount
$ % $900
Total List Price Trade Discount = Invoice Amount
$ $ = $600

10. Cash/ Purchase Discount
A deduction that a vendor allows on the invoice amount to encourage prompt payment. Cash Discount
A discount on purchases taken by a customer is called a Purchase discount.
Shows on the invoice 2/10 N/30
2% discount if paid within the first 10 days or the whole balance has to be paid within 30 days

11. Purchase Invoice Amount x Purchase Discount Rate = Purchase Discount
March 9th Paid cash on account to Pro Golf Company, $ covering Purchase Invoice No for $ , less 2% discount, $ Check 224
Cash Payments Journal
General
Accounts Payable Debit
Purchase Discount Credit
Cash Credit
Date
Account Title
Ck No.
Post Ref
Debit
Credit
Mr 9
Pro Golf Company
224
7254
145.08
Purchase Invoice Amount x Purchase Discount Rate = Purchase Discount
X % = $145.08
Purch. Invoice Amount Purch. Disc = Cash Amount after
Discount
= $

12. Petty Cash – money that is set aside for incidental things.
PETTY CASH REPORT
Date: February 28,20xx
Custodian
Janice Morgan
Explanation
Reconciliation
Replenish Amount
Payments $
Supplies
45.34
Advertising 25
Miscellaneous
44.22
Less:
Total Payments $
114.56
Equals
Recorded amount on hand $
Actual amount on hand $
Cash Short (over) $
1.59
Amount to replenish
116.15
Petty Cash – money that is set aside for incidental things.
We use a form to keep track of the expenses .
This is the box that tells us if we are over (have to much) or short.
Now we have to record the transaction in the journal
This is what we actually have
These are the expenses that we had
This is what we started with:
This is the amount that you need to take out of cash to replenish our petty cash
This is the amount that we should have in the
Box.
This is the total of all of the expense

13. PETTY CASH REPORT
Date: February 28,20xx
Custodian
Janice Morgan
Explanation
Reconciliation
Replenish Amount
Payments $
Supplies
32.33
Advertising 40
Miscellaneous
28.5
Less:
Total Payments $
100.83
Equals
Recorded amount on hand $
Actual amount on hand $
Cash Short (over)
$ (2.17)
-2.17
Amount to replenish
98.66
Cash Payments Journal
Date
Account Title
CK NO
Post Ref
General
Accounts Pay Debit
Cash Credit
Debit
Credit
Dec 31
Supplies
249
32.33
98.66
Repair Expense 40
Advertising Expense
28.5
Cash Short and Over
2.17

14. Purchase Return and Allowance
When we return merchandise to a vendor because it does not work, or something is wrong with it.
Debit Memorandum
General Journal
Page 1
Date
Account Title
Doc No
Post Ref
Debit
Credit
Mar 8
Accounts Pay/ Second Round Inc
143
Purchase Returns and Allowance

15. Here is how this account works
As the year goes along we return items and record them into a purchase returns and allowance account.
At the end of the year we take the allowance and returns account and subtract it from the purchases account.

16. Accounts Pay/Sec Round Inc
General Journal
Date
Accounts Title
Doc No
Post Ref
Debit
Credit
Mar 8 
Accounts Pay/Sec Round Inc
DM78 
143
 Purchase Ret and All
143 
2115
280
5115
March 8 Returned merchandise to Second Round, Inc. $143, covering Purchase invoice No Debit Memorandum No. 78

17. Problems 18-1,2,3,4,5,6
Mastery Problem on the Computer