1. 10 - 1 Special Journals: Purchases and Cash Payments Chapter 10

2. 10 - 2 Special journals assist business owners, managers, and accounting personnel in efficient record keeping and better internal control. Special journals assist business owners, managers, and accounting personnel in efficient record keeping and better internal control. Special Journals

3. 10 - 3 Learning Objective 1 Calculating net purchases.

4. 10 - 4 Purchases = Amount of units purchased times the cost of each unit Purchases = Amount of units purchased times the cost of each unit It is the amount that is debited to the purchases account in the purchases journal entry. It is the amount that is debited to the purchases account in the purchases journal entry. Normal balance is a debit. Learning Unit 10-1

5. 10 - 5 Learning Unit 10-1 Accounts Affected Category Rules Purchases Cost Dr. 4,000 Accounts Payable Liability Cr. 4,000 Purchases Cost Dr. 4,000 Accounts Payable Liability Cr. 4,000

6. 10 - 6 Learning Unit 10-1 n The Purchases Returns and Allowances account is used to record a reduction of an amount owed. n A debit memo is issued for returned, damaged, or defective purchased merchandise. n The amount of these reductions and refunds is credited in the journal entry. n Normal balance is a credit.

7. 10 - 7 Learning Unit 10-1 Accounts Affected Category Rules Accounts Payable Liability Dr. 500 Purchases Returns Contra- Cr. 500 and Allowances Cost Accounts Payable Liability Dr. 500 Purchases Returns Contra- Cr. 500 and Allowances Cost

8. 10 - 8 Learning Unit 10-1 Purchases discount = A percent decrease in the amount paid to a supplier. Purchases discount = A percent decrease in the amount paid to a supplier. All payments should be timely to take advantage of this discount. All payments should be timely to take advantage of this discount.

9. 10 - 9 Learning Unit 10-1 F.O.B. destination: The seller is responsible for freight. F.O.B. destination: The seller is responsible for freight. F.O.B. shipping point: The buyer is responsible for freight. F.O.B. shipping point: The buyer is responsible for freight.

10. 10 - 10 Learning Objective 2 Journalizing transactions in a purchases journal.

11. 10 - 11 Learning Unit 10-2 n The following steps are taken in purchasing merchandise and recording purchases: 1Prepare a Purchase Requisition: This is a request that merchandise be purchased for resale to customers. 2Prepare a Purchase Order: Check price lists for the best purchase deal.

12. 10 - 12 Learning Unit 10-2 3Prepare a Sales Invoice: This is done by the seller company. 4Prepare a Receiving Report: This is done when the goods are received. 5Verifying the Numbers: All numbers are cross-checked for accuracy prior to recording and payment.

13. 10 - 13 Learning Objective 3 Posting from a purchases journal to the accounts payable subsidiary ledger and the general ledger.

14. 10 - 14 Learning Unit 10-2 n Recorded purchases are posted in total to the Purchases account and the Accounts Payable account. n They are also recorded as credits to individual creditors in the Accounts Payable account.

15. 10 - 15 Purchases Journal Accounts Date Account Payable Purchases 20xx Credited Terms Credit Debit July 1 XYZ Co. 2/10, n/30 1,000 Supplies Accounts Date Account Payable Purchases 20xx Credited Terms Credit Debit July 1 XYZ Co. 2/10, n/30 1,000 Supplies

16. 10 - 16 Special Journals Purchases Journal Purchases of inventory for resale on account Purchases Journal Purchases of inventory for resale on account Cash Payments Journal All payments of cash (cash disbursements journal) Cash Payments Journal All payments of cash (cash disbursements journal) Learning Unit 10-2

17. 10 - 17 Learning Unit 10-2 n Purchase transaction amounts are posted to each supplier in the purchases journal and accounts payable subsidiary ledgers. n This process allows up-to-date records of accounts payable balances.

18. 10 - 18 Learning Unit 10-2 n The purchases journal records all purchases on account (credit purchases only). n Each credit purchase transaction is posted to each accounts payable supplier as a credit. n The totals of the Accounts Payable, and Purchases columns are posted to each of these general ledger accounts. n Cash discount terms are listed.

19. 10 - 19 Learning Objective 4 Preparing, journalizing, recording, and posting a debit memorandum.

20. 10 - 20 Learning Unit 10-2 n What is a debit memorandum? n It is a record of purchases, returns and allowances showing amounts that were deducted from the balance owed to creditors. n It relates to a contra-expense account with a normal credit balance.

21. 10 - 21 Learning Unit 10-2 Accounts Affected Category Rules Accounts Payable Liability Dr. Purchases Returns Contra- Cr. and Allowances Cost Debit memo #1 Accounts Payable Liability Dr. Purchases Returns Contra- Cr. and Allowances Cost Debit memo #1

22. 10 - 22 Learning Objective 5 Journalizing and posting from a cash payments journal.

23. 10 - 23 Learning Unit 10-3 n The cash payments journal records all payments made in cash. n Accounts Payable, Purchase Discount, and Cash column totals are posted to the general ledger. n Sundry is a miscellaneous accounts column that provides flexibility for reporting transactions.

24. 10 - 24 Learning Objective 6 Preparing a schedule of accounts payable.

25. 10 - 25 Learning Unit 10-3 n Accounts Payable is the controlling account in the general ledger. n At the end of the month, the total owed in Accounts Payable should equal the sum owed to the individual creditors that are listed on the schedule of accounts payable.

26. 10 - 26 End of Chapter 10