1. Recording Purchases and Cash Payments Using Special Journals
Chapter 18
Recording Purchases and Cash Payments Using Special Journals

2. Think…
Up until now, we have only been dealing with a General Journal (with special amount columns). Our journal went from having 5 columns to 11 columns.
Why did we go from 5 to 11 columns?
In this chapter we will begin using 2 new journals (Purchases and Cash Payments) along with our General Journal.
Why do you think we will be using an additional 2 new journals?

3. After this chapter, you will be able to…
Defining accounting terms related to purchases and cash payments
Identify accounting concepts and practices related to purchases and cash payments
Record purchases on account and post using a purchases journal
Record expenses and purchases using a cash payments journal
Record petty cash and post using a cash payments journal
Record transactions and post using a general journal.

4. 18-1
Recording Purchases on Account Using a Purchases Journal

5. New Business- Winning Edge, Inc.
Winning Edge is a CORPORATION
Same legal rights as a person
Own property, incur liabilities, enter into contracts
Owned by many persons
Must receive state or federal approval
Sell ownership of itself
Share of Stock- Each unit of ownership
Capital Stock- Total shares of ownership
What do you think are some benefits of being formed as a corporation?

6. Winning Edge
Sells sporting equipment
School Districts, Colleges, and Businesses
What’s different about selling to Schools and Colleges?
Main difference between Corporations and Proprietorships/Partnerships are their Capital Accts:
Proprietorships and Partnerships have one Capital and one Drawing Account per owner
Corporations have separate Capital accounts for the stock issued and earnings kept in the business

7. Winning Edge
Larger businesses having many daily transactions may use many different journals.
A journal used to record only one kind of transaction is called a special journal.
What are the benefits of having special journals?
Winning Edge uses 4 special journals:
Purchases Journal
Cash Payments Journal
Sales Journal
Cash Receipts Journal

8. Transactions all recorded on one line
PURCHASES JOURNAL
The Purchases Journal is used to record ONLY purchases of merchandise on account
Transactions all recorded on one line
Always a Dr to Purchases and a Cr to Accts Payable
Source Document is always a Purchase No.
Account Title becomes Account Credited
Lesson 18-1, page 455

9. JOURNALIZING PURCHASES ON ACCOUNT
March 2. Purchased merchandise on account from Pro Golf Company, $7, Purchase Invoice No. 179.
Accounts Affected
Purchases
Accounts Payable
Classification
Cost
Liability
Change
Increased
Entered
Debit side
Credit side
Pro Golf Company
Purchases
GENERAL LEDGER
ACCOUNTS PAYABLE LEDGER
Accounts Payable
normal balance
normal balance 
7,254.00 
7,254.00
normal balance 
7,254.00
Lesson 18-1, page 456

10. JOURNALIZING PURCHASES ON ACCOUNT2 1 4 3
1. Date
2. Vendor Name
3. Purchase Invoice Number
4. Purchase Invoice Amount
No abbreviation is needed for the source document… Why?
Lesson 18-1, page 456

11. POSTING FROM A PURCHASES JOURNAL TO AN ACCOUNTS PAYABLE LEDGER2 1 3 5 4
1. Date
4. Balance
2. Journal Page Number
5. Vendor Number
3. Credit
Lesson 18-1, page 457

12. POSTING FROM A PURCHASES JOURNAL TO A GENERAL LEDGER
1. Rule a single line.
2. Write the date. 1
3. Write word Total. 2
4. Add the amount column, write total, rule double lines. 3 4 5 6
5. Post the amount total to the Debit column of Purchases.
6. Post the amount total to the Credit column of Accounts Payable.
Lesson 18-1, page 458

13. TERMS REVIEW corporation share of stock capital stock special journal
purchases journal
Lesson 18-1, page 459

14. Audit Your Understanding (Page 459)
What are some business transactions a corporation can conduct in its own name?
What is the principal difference between the accounting records of a corporation and those of a proprietorship/partnership?
What accounts are affected, and how, when the total amount of the purchases journal is posted?