1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1-2 Journalizing and Posting Purchases and Purchases Returns

2. CENTURY 21 ACCOUNTING © Thomson/South-Western DEPARTMENTAL ACCOUNTING SYSTEM Merchandising Business – a business that purchases and sells goods Departmental Accounting System – an accounting system showing accounting information for two or more departments Departmental accounting information can help management decide whether a department’s performance is acceptable or not. Departmental Purchases on account – recorded in purchases journal. Differences in departmental accounting: Each purchase invoice has a notation placed on it showing to which department the purchase applies Each department has a separate Purchases debit column in the purchases journal 2 LESSON 1-2

3. CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 1-2 June 1. Purchased video equipment on account from Western Digital Systems, $845.00. Purchase Invoice No. 336. JOURNALIZING PURCHASES ON ACCOUNT 1.Write approval date. 4.Write invoice amount. 3.Record invoice number. 2.Write vendor name. page 13 2 2 3 3 4 44 1 1 Departments

4. CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 1-2 1.Write the date. 5.Write vendor number. 4.Calculate new account balance. 3.Record the credit amount. 2.Write journal page number. POSTING FROM A PURCHASES JOURNAL page 14 4 5 3 1 2

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 1-2 4.Calculate new account balance. 3.Write column total. 2.Write journal page number. POSTING THE TOTALS OF A PURCHASES JOURNAL page 15 1.Write the date. 5.Write account number. 3 4 1 2 5

6. CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 9-4 DEBIT MEMORANDUM FOR PURCHASES RETURNS AND ALLOWANCES page 256  Customers may not want to keep merchandise that is inferior in quality or is damaged when received.  Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer’s accounts payable, is called a purchases return  When merchandise is damaged but still usable or is of different quality than that ordered, the vendor may let the customer keep the merchandise at a reduced price  Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer’s accounts payable, is called a purchases discount

7. CENTURY 21 ACCOUNTING © Thomson/South-Western PURCHASE RETURNS & ALLOWANCES 7 LESSON 1-2  When merchandise is returned to a vendor, the vendor’s account & Accounts Payable are reduced by a debit  Debit Memorandum – a form prepared by the customer showing the price deduction for purchase returns & allowances  Contra Account – an account that reduces a related account on a financial statement  Purchases discount is a contra cost account  It is part of the Cost of Goods Sold section of the income statement

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 1-2 2.Enter accounts to be debited. 3.Record debit memo number. JOURNALIZING PURCHASES RETURNS AND ALLOWANCES page 16 6 1 1 2 2 3 3 4 75 1.Write the date. 4.Draw diagonal line. 5.Write debit amount. 7.Write credit amount. 6.Enter account to be credited.

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 1-2 TERMS REVIEW departmental accounting system merchandising business posting debit memorandum contra account page 17