1. 0 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 15, Section 2 Analyzing and Recording Purchases on Account What Do You Think? Why do you think a large business needs to maintain an accounts payable subsidiary ledger?

2. 1 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Main Idea Individual accounts payable transactions are posted to a subsidiary ledger. You Will Learn  how to journalize purchases on account.  how to journalize and post purchases returns and allowances. Analyzing and Recording Purchases on Account SECTION 15.2

3. 2 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Key Terms  accounts payable subsidiary ledger  tickler file  due date  purchases return  purchases allowance  debit memorandum Analyzing and Recording Purchases on Account SECTION 15.2

4. 3 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Purchases of Assets on Account The most important thing a retail business purchases is merchandise to resell. Merchandise can be bought on a cash basis or on account. Analyzing and Recording Purchases on Account SECTION 15.2

5. 4 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Accounts Payable Subsidiary Ledger A business that makes many purchases on credit will set up an accounts payable subsidiary ledger with an account for each creditor or supplier. The individual accounts are summarized in the Accounts Payable general ledger controlling account. Analyzing and Recording Purchases on Account SECTION 15.2

6. 5 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Accounts Payable Subsidiary Ledger Form The ledger account form has a space for the creditor’s name and address and contains three amount columns:  the Debit column  the Credit column  the Balance column Analyzing and Recording Purchases on Account SECTION 15.2

7. 6 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Merchandise Purchases on Account When a purchase of merchandise on account is recorded, a diagonal line is entered in the Posting Reference column to indicate the credit amount is posted in two places.  First to the Accounts Payable controlling account.  Then to the individual account in the accounts payable subsidiary ledger. The invoice is then placed in a tickler file according to its due date. Analyzing and Recording Purchases on Account SECTION 15.2

8. 7 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Analyzing and Recording Purchases on Account SECTION 15.2

9. 8 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Analyzing and Recording Purchases on Account SECTION 15.2

10. 9 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Other Purchases on Account The following example illustrates the purchase of store equipment on account. Analyzing and Recording Purchases on Account SECTION 15.2

11. 10 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Other Purchases on Account Analyzing and Recording Purchases on Account SECTION 15.2

12. 11 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Other Purchases on Account Analyzing and Recording Purchases on Account SECTION 15.2

13. 12 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Purchases Returns and Allowances A purchase return occurs when a business returns merchandise for a full credit. A purchase allowance occurs when a business keeps unsatisfactory merchandise but pays a discounted price. A debit memorandum is used to notify suppliers of a purchase return or request for purchases allowance. Analyzing and Recording Purchases on Account SECTION 15.2

14. 13 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Purchases Returns and Allowances Analyzing and Recording Purchases on Account SECTION 15.2

15. 14 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Recording a Purchases Returns and Allowances Transaction Analyzing and Recording Purchases on Account SECTION 15.2

16. 15 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Recording a Purchases Returns and Allowances Transaction Analyzing and Recording Purchases on Account SECTION 15.2

17. 16 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Posting to General Ledger Accounts Payable Subsidiary Ledger Analyzing and Recording Purchases on Account SECTION 15.2

18. 17 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Key Terms Review  accounts payable subsidiary ledger A separate ledger that contains accounts for all creditors; it is summarized in the Accounts Payable controlling account in the general ledger.  tickler file A file that contains a folder for each day of the month into which invoices are placed according to their due dates.  due date The date by which an invoice must be paid. Analyzing and Recording Purchases on Account SECTION 15.2

19. 18 Glencoe Accounting Unit 4 Chapter 15 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Key Terms Review  purchases return The return of merchandise bought on account to the supplier for full credit.  purchases allowance A price reduction given when a business keeps unsatisfactory merchandise it has bought.  debit memorandum The form a business uses to notify its suppliers (creditors) of a return or to request an allowance. Analyzing and Recording Purchases on Account SECTION 15.2