1. Ch. 17: Purchases and Cash Payments
Accounting II
Ms. Alltucker

2. Chapter Objectives
Explain the purpose of the purchases and cash payments journal
Record transactions in the purchases journal and cash payments journal
Record payroll transactions in the cash payments journal
Post from the purchases and cash payments journal
Total, prove, and rule the purchases and cash payments journals
Prepare a schedule of accounts payable
Prove cash
Define accounting terms introduced in this chapter

3. Ch 17-1 The Purchases Journal
What you will learn:
The purpose of the purchases journal
How to record purchases on account
How to post from purchases journal
How to total, prove, rule the purchase journal
Why it’s important:
The purchases journal helps businesses keep track of purchases on account.

4. Purchase Journal
Special journal used to record all purchases on account

5. Recording the Purchase of Merchandise on Account
Business Transaction
On December 14, On Your
Mark received Invoice 7894
from Pro Runner Warehouse
for merchandise purchased
on account, $2,300, terms
2/10, n/30.
JOURNAL ENTRY

6. Recording the Purchase of Merchandise on Account
Enter the date
Enter the invoice number
Enter the creditor’s name
Enter the TOTAL of the invoice in the Accounts Payable Credit column
For purchases of merchandise on account– enter the total amount of the invoice in the purchases debit column
**after the invoice is journalized, it is placed in a tickler file by due date

7. Journalizing Other Purchases on Account
Businesses often purchases supplies and other assets on account
These purchases do not occur often enough to set up special columns in the purchases journal
When this occurs, recorded in the general debit column of the purchases journal

8. Journalizing Other Purchases on Account
On December 15 On your Mark received Invoice #3417 from Champion Store Supply for store equipment bought on account $1200, terms n/30.
Dec 15
3417
Chapman Store Supply
1200
Store Equip
1200

9. Journalizing Other Purchases on Account
Enter date invoice was RECEIVED
Enter the invoice number
Ender credits name in the Creditor’s Account Credited column
Enter the TOTAL of the invoice in the A/P credit column
Write the name of the general ledger account being debited in the general account debited column
Store equipment is not merchandise purchased for resale
DO NOT RECORD IN THE PURCHASES DEBIT COLUMN
Enter the total amount of the invoice in the general debit column

10. Posting to the A/P Subsidiary Ledger
Each transaction in the purchases journal is a purchase on account
Each transaction is separately posted to the accounts payable subsidiary ledger
Transactions are posted DAILY

11. Posting to the A/P Subsidiary Ledger

12. Posting to the A/P Subsidiary Ledger
Enter the date of the transaction
Record post reference number P6
In credit column of the subsidiary ledger, enter the amount owed to the creditor
Compute the new account balance
Return to purchases journal and place a check mark in the first post reference column

13. Posting from the General Debit Column
Daily postings

14. Posting from the General Debit Column
Enter the date of transaction
Enter the post reference number, P6
In the debit column of the general ledger account, enter the amount recorded
Compute the new balance
Return to purchases journal and place the general ledger account number in the General Posting reference column

15. Totaling, Proving, and Ruling the Purchases Journal
Draw a single line across the three amount columns
Accounts payable credit
Purchases debit
General debit
Foot each amount column
Test for the equality of debits and credits
Debit Columns
Credit Columns
Purchases $15,400
General ,450
$16,850
Accounts Payable $16,850

16. Totaling, Proving, and Ruling the Purchases Journal
In the date column, on the line below the single rule, enter the date the journal is being totaled
On the same line, write totals
Enter the three column totals in ink below the footing
Draw a double line across the three amount columns
LOOK ON PAGE 454 FOR AN EXAMPLE

17. Totaling, Proving, and Ruling the Purchases Journal
A completed purchase journal is a quick reference tool to review current transactions that affect purchases and accounts payable
Miscellaneous purchases are reflected here too
If a general journal had been used, these transactions would have been mixed in with all of the other transactions

18. Posting the Special Column Totals of the Purchases Journal
After the purchases journal is proven—post the totals of the:
Accounts payable credit column
Purchases debit column
Calculate the new balance
Write the general ledger account number, in parentheses, in the column below the double rule
The total of the general debit column is not posted
Put a check mark below that column
Indicates that the total is not to be posted
LOOK ON PAGE 456 FOR AN EXAMPLE