1. Chapter 9 Accounting 1

2.  In your notebooks:  Of all accounts in the general ledger, which account do you believe is impacted most?  Why this account in particular?  Do you think this would constitute a special journal?

3.  Cash payments journal: special journal used to record only cash payment transactions  May be designed to accommodate a business’ frequent cash payment transactions  Special amount column for this general ledger account  Many cash transactions affect accounts payable, so a special amount column is also used for that general ledger account  Source document is usually a check

4.  Cash discount: deduction vendor allows on invoice amount to encourage prompt payment  Purchase discount: cash discount on purchases taken by a customer  when taken, a customer pays less than invoice amount previously recorded in purchases account  Reduces customer’s cost of merchandise purchased  General amount column: journal amount column not headed with account title

5.  P. 242 and 243  Includes:  A general debit and credit column. For occasional cash transactions, such as rent  3 special columns 1. Accounts Payable debit For payments made on accounts payables 2. Purchase discount credit A cash discount received when you pay cash for purchases of merchandise 3. Cash credit A deduction given by the vendor to encourage prompt payment P. 243

6.  Supplies not recorded in purchases account because supplies aren’t intended for sale  Cash register tapes and price tags are examples of supplies used in a business

7. CASH PAYMENTS JOURNALPAGE? DATE ACCT. TITLE CK. NO. POST. REF. GENERAL JOURNAL ACCOUNTS PAYABLE DEBIT PURCHASES DISCOUNT CREDIT CASH CREDIT DEBITCREDIT 2013 11 22 33 44 5 5 6 6 7 7 8 8

8. Page 243  Cash payment for expense  Cash payment for supplies

9. CASH PAYMENTS JOURNALPAGE? DATE ACCT. TITLE CK. NO. POST. REF. GENERAL JOURNAL ACCOUNTS PAYABLE DEBIT PURCHASES DISCOUNT CREDIT CASH CREDIT DEBITCREDIT 2013 1Nov2Advertising Expense292150.00 1 22 33 44 5 5 6 6 7 7 8 8 November 2. Paid cash for advertising, $150.00. Check No. 292

10. CASH PAYMENTS JOURNALPAGE? DATE ACCT. TITLE CK. NO. POST. REF. GENERAL JOURNAL ACCOUNTS PAYABLE DEBIT PURCHASES DISCOUNT CREDIT CASH CREDIT DEBITCREDIT 2013 1Nov2Advertising Expense292150.00 1 2Nov5Supplies—Office29394.00 2 33 44 5 5 6 6 7 7 8 8 November 6. Paid cash for office supplies, $94.00. Check No. 293

11.  Cash payment for expense  Cash payment for supplies  Practice:  9 – 2 WT  Oct 1 st and 7 th transactions

12. Page 244  Cash payment for purchases  Merchandise usually purchased on account (use purchase journal)  Might be cash because Discounts make it a better choice to pay cash New customer, so credit not offered by the vendor Poor paying history, so credit rescinded by the vendor  Business would pay vendor with check before merchandise is shipped or delivered

13.  List price: retail price listed in catalog or on Internet site  Trade discount: reduction in list price granted to customers  Given when merchandising business purchases number of products from manufacturer  Invoice amount: amount after trade discount is deducted from list price only the invoice amount is used in a journal entry

14.  Trade discount – Reduces list price  Due to quantities being purchased – the more purchased, the lower the price List PricexTrade Discount Rate=Trade Discount 1500.00x60%=900.00 Total List Price-Trade Discount=Invoice Amount 1500.00-900.00=600.00

15. CASH PAYMENTS JOURNALPAGE? DATE ACCT. TITLE CK. NO. POST. REF. GENERAL JOURNAL ACCOUNTS PAYABLE DEBIT PURCHASES DISCOUNT CREDIT CASH CREDIT DEBITCREDIT 2013 1Nov2Advertising Expense292150.00 1 2Nov5Supplies—Office29394.00 2 3 117Purchases301600.00 11 12 13 14 15 November 7. Purchased merchandise for cash $600.00, Check #301.

16.  Practice:  9-2 WT  October 11

17. Page 245  Discounts are offered for prompt payment on Merchandise purchases  Invoices will show the terms of sale:  Example: 2/10,n/30 2/10: 2% of the invoice amount may be deducted if paid within 10 days n/30:Net thirty – the total invoice amount must be paid within 30 days

18. Example: 2/10,n/30 Calculate: Invoice amount - $1,000 Invoice date – 3/1/2013 Terms 2/10, n/30  If paid by March 10: Pay discount: $1,000 - $20 = $980  If paid after March 10: Pay net amount - $1,000  If paid after March 31: Your payment is late and may result in finance charges Purchase Invoice Amt xPurchase Discount Rate =Purchase Discount $1,000x2%=$20 Purchase Invoice Amount -Purchase Discount=Cash Amount After Discount $1,000-$20=$980

19.  Contra account: account that reduces related account on financial statement  Purchases discounts recorded in general ledger account titled Purchases Discount  Purchases discount is contra account to Purchases  Since contra accounts are deductions from related accounts, contra account normal balances are opposite the normal balances of related accounts Therefore, normal balance of Purchases Discount account is a credit Even though trade discounts aren’t recorded, cash discounts are recorded

20. Page 245  Purchase Discounts Purchase Discounts

21. Page 245  Calculate your Purchase Discount: 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. Purchase Invoice AmtxPurchase Discount Rate =Purchase Discount $498.00x2%=$9.96 Purchase Invoice Amount -Purchase Discount=Cash Amount After Discount $498.00-$9.96=$488.04

22. CASH PAYMENTS JOURNALPAGE? DATE ACCT. TITLE CK. NO. POST. REF. GENERAL JOURNAL ACCOUNTS PAYABLE DEBIT PURCHASES DISCOUNT CREDIT CASH CREDIT DEBITCREDIT 2013 1Nov2Advertising Expense292150.00 1 2Nov5Supplies—Office29394.00 2 3 11Nov8Gulf Craft Supply302498.009.96488.0411 12 13 14 15 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.

23.  Some vendors don’t offer purchases discounts  Business may not have cash available to take advantage of purchases discount  In both cases, full purchase invoice is paid  Practice:  Finish 9-2 WT  Complete 9-2 OYO