1. Accounting 3 Chapter 18 Section 1

2. Vocabulary Corporation- An organization with the legal rights of a person and which may be owned by many persons. Corporation- An organization with the legal rights of a person and which may be owned by many persons. Share of Stock- Each unit of ownership in a corporation. Share of Stock- Each unit of ownership in a corporation. Capital Stock- Total shares of ownership in a corporation. Capital Stock- Total shares of ownership in a corporation. Special Journal- A journal used to record only one kind of transaction. Special Journal- A journal used to record only one kind of transaction.

3. Differences Between Ownerships The main difference among the accounting records of proprietorships, partnerships, and corporations is in the capital accounts. The main difference among the accounting records of proprietorships, partnerships, and corporations is in the capital accounts. Proprietorships and partnerships have a single capital and drawing account for each owner. Proprietorships and partnerships have a single capital and drawing account for each owner. Corporations have separate capital accounts for the stock issued and the earnings kept in the business. Corporations have separate capital accounts for the stock issued and the earnings kept in the business.

4. Special Journals A General Journal is used in a corporation. A General Journal is used in a corporation. Four types of special journals are used in corporations: Four types of special journals are used in corporations: Purchases (discussed in this section) Purchases (discussed in this section) Cash Payments Cash Payments Sales Sales Cash Receipts Cash Receipts

5. Purchases Journal This journal is used only to record purchases of merchandise on account. This journal is used only to record purchases of merchandise on account. A purchase on account can be recorded on one line. A purchase on account can be recorded on one line. There is only one special amount column. There is only one special amount column. Each entry in this column is both a debit to Purchases and a credit to Accounts Payable. (This is just combining the same two columns from the expanded journal used in Accounting 2.) Each entry in this column is both a debit to Purchases and a credit to Accounts Payable. (This is just combining the same two columns from the expanded journal used in Accounting 2.)

6. Purchases Journal Instead of a Doc. No. column, a Purch. No. column is used. This is due to purchase invoices as the only source document in this journal. Instead of a Doc. No. column, a Purch. No. column is used. This is due to purchase invoices as the only source document in this journal. Instead of an Account Title column, an Account Credited column is used. This is done because you must specify which company the merchandise was purchased from and credit that account in the accounts payable ledger. Instead of an Account Title column, an Account Credited column is used. This is done because you must specify which company the merchandise was purchased from and credit that account in the accounts payable ledger.

7. Example of Purchases Journal Purchases Journal Page ___ DateAccount Credited Purch. No. Post Ref. Purchases Dr. Acct Pay Cr.

8. Journalizing Purchases on Account Example Transaction: March 2. Purchased merchandise on account from Pro Golf Company, $7,254.00. Purchase Invoice No. 179. Example Transaction: March 2. Purchased merchandise on account from Pro Golf Company, $7,254.00. Purchase Invoice No. 179. Accounts Effected: Accounts Effected: Visual steps for completion on next slide. Visual steps for completion on next slide. General Ledger Purchases 7,254.00 Accounts Payable 7,254.00 Accounts Payable Ledger Pro Golf Company 7,254.00

9. Journalizing Purchases on Account Purchases Journal Page ___ DateAccount Credited Purch. No. Post Ref. Purchases Dr. Acct Pay Cr. Mar2Pro Golf Company179 3 7 2 4 5 00

10. Posting from Purchases Journal to Accounts Payable Ledger The amount on each line of a purchases journal is posted as a credit to the vendor account in the accounts payable ledger. The amount on each line of a purchases journal is posted as a credit to the vendor account in the accounts payable ledger. The posting reference used for the purchases journal is P along with the page number of the transaction. (P3 for this one) The posting reference used for the purchases journal is P along with the page number of the transaction. (P3 for this one) Once posting is done, posting references must be entered on the purchases journal page. Once posting is done, posting references must be entered on the purchases journal page. Visual steps on next slide. Visual steps on next slide.

11. Posting from a Purchases Journal to an Accounts Payable Ledger AccountAcct No. DateItem Post Ref DebitCredit Balance Pro Golf Company 260 Mar 2P3 3 6 8 1 001Balance 10 9 2 6 007 2 5 4 00

12. Posting from Purchases Journal to a General Ledger At the end of the fiscal period, the purchases journal must be ruled and totaled. At the end of the fiscal period, the purchases journal must be ruled and totaled. Once this is done, the total must be posted in the General Ledger in both the Purchases and Accounts Payable accounts. Once this is done, the total must be posted in the General Ledger in both the Purchases and Accounts Payable accounts. Visual steps on next two slides. Visual steps on next two slides.

13. Purchases Journal Page ___ DateAccount Credited Purch. No. Post Ref. Purchases Dr. Acct Pay Cr. Mar2Pro Golf Company179 725400 3 31Raffo Company180 260 270 3 7 1 0 00 31Total 10 9 6 4 00 (5105) (2115) *These should be entered after totals have been posted into the general ledger.

14. Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Accounts Payable2115 Purchases 5105 Mar 29G4 1 2 0 00 24 0 0 7 00 31P310 9 6 4 00 34 9 7 1 00 1Balance 23 8 8 7 00 Mar1Balances 72 3 7 4 00 16CP6 2 4 0 00 72 6 1 4 00 31P3 10 9 6 4 00 83 5 7 8 00

15. Work Together p. 459 Purchases Journal Page ___ DateAccount Credited Purch. No. Post Ref. Purchases Dr. Acct Pay Cr. 4 Apr2Farris, Inc.45 1 7 0 0 00Post 5Delta Manufacturing46 3 2 6 5 00Post 8Williams Company47 7 8 0 00Post 30Total 220 210 230 *These should be entered after the credit to vendor account has been posted. 5 7 4 5 00Post (2115) (5105) *These should be entered after the totals have been posted. Assignment Look at postings after each step is complete and use the back button to get to the next step. Once finished, this is the end of section 1.

16. AccountAcct No. DateItem Post Ref DebitCredit Balance Delta Manufacturing 210 Apr1Balance 2 2 4 5 00 5P4 3 2 6 5 00 5 5 1 0 00

17. AccountAcct No. DateItem Post Ref DebitCredit Balance Farris, Inc. 220 Apr1Balance 1 2 5 7 00 2P4 1 7 0 0 00 2 9 5 7 00

18. AccountAcct No. DateItem Post Ref DebitCredit Balance Williams Company230 Apr 8 P4 7 8 0 00 7 8 0 00

19. Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Account Acct No. DateItem Post Ref DebitCredit BALANCE DEBITCREDIT Accounts Payable2115 Apr 1 Balance 8 7 6 0 00 30 P4 5 7 4 5 00 14 5 0 5 00 Purchases 5105 Apr 1 Balance 18 7 8 1 00 30 P4 5 7 4 5 00 24 5 2 6 00

20. Assignment Do Application 18-1 on page 477 by hand. Do Application 18-1 on page 477 by hand. Turn it in to Mrs. Middleton. Turn it in to Mrs. Middleton. Move on to section 18-2. Move on to section 18-2.