1. Chapters 10

2.  Partnership  A business with two or more owners combining their assets and skills  Partner  Each member/owner of a partnership

3. Lesson 10.1

4.  Merchandising Business  A business that purchases and sells goods  Retail Merchandising Business  A merchandising business that sells to those who use or consume the goods  Merchandise  Goods that a merchandising business purchases to sell  Wholesale Merchandising Business  A business that buys and resells merchandise to retail merchandising businesses

5.  5-Column vs. 11-Column  The number of amount columns  Encore Music – 5-Column Journal  Omni Imports – 11-Column Journal  New special amount columns: A/R, A/P, Purchases Dr., Sales Tax Payable Cr.  Special amount columns  For accounts that are used frequently  To save time and space

6.  Cost of Merchandise/Cost of Goods Sold (COGS)  The price a business pays for goods it will sell  Markup  The amount added to the cost of merchandise to establish the selling price  Vendor  The business which merchandise, supplies, or other assets are bought  CONCEPT: Historical Cost  Amount paid for merchandise or other items bought is recorded

7.  Cost account  Because it is in the cost of merchandise division of the chart of accounts  Look at Omni Imports Chart of Accounts on p. 225  Temporary Account  ONLY merchandise purchases (not supplies or any other purchase) Purchases Credit Debit normal

8.  November 1  Purchased merchandise for cash, $575.00. Check No. 290. Purchases Cash 575.00

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10. Lesson 10-2

11.  Purchase Invoice  An invoice used as a source document for recording a purchase on account transaction  Created by the vendor  Omni Imports give the invoice its own number  Terms of Sale  An agreement between a buyer and seller about payment for merchandise  Ex: 30days (payment is due within 30 days of the vendor’s date of the invoice)

12.  November 2  Purchased merchandise on account from Crown Ltd., $2,039.00. Purchase Invoice No. 83. Purchases Accounts Payable 2,039.00

13.  November 5  Paid cash for office supplies, $34.00. Check No. 292  Office Supplies are supplies used in general business operations (paper, pens, price tags, etc.) Supplies - Office Cash 34.00

14.  November 6  Bought store supplies on account from Foxfire Supply, $210.00. Memorandum No. 52  An invoice is received from the vendor when buying on account, to avoid confusion a memo is attached and used as the source document Supplies - Store Accounts Payable 210.00

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16. Lesson 10-3

17.  November 7  Paid cash on account to Pacific Imports, $1,050.00, covering Purchase Invoice No. 81. Check No. 294  Check no. is used as the source doc because it is our source Accounts Payable Cash 1,050.00

18.  November 9  Paid cash for advertising, $150.00. Check No. 296. Advertising Expense Cash 150.00

19.  November 9  Paid cash to replenish the petty cash fund, $205.00: office supplies, $35.00; store supplies, $47.00; advertising, $92.00; miscellaneous, $31.00. Check No. 297 Supplies - Office 35.00 Supplies - Store 47.00 Cash 205.00 Miscs Expense 31.00 Advertising Expense 92.00

20.  November 10  Michelle Wu, partner, withdrew cash for personal use, $1,200.00. Check No. 298. Michelle Wu, Drawing Cash 1,200.00

21.  November 12  Karl Koehn, partner, withdrew merchandise for personal use, $300.00. Memorandum No. 53. Karl Koehn, Drawing Purchases 300.00

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23. Chapter 11

24.  Customer  A person or business to whom merchandise or services are sold  Sales Tax  A tax on a sale of merchandise or services Sales Tax Payable CreditDebit normal Price of GoodsxSales Tax Rate= Sales Tax $300.00 x 6%= $18.00 Price of Goods+ Sales Tax=Total Amt Received $300.00 + $18.00= $318.00

25. Lesson 11.1

26.  CONCEPT: Realization of Revenue  No matter when payment is made revenue is recorded at the time of sale  Cash Sale  A sale where cash is received at the time of sale  Credit Card Sale  A sale where a credit card is used at the time of sale  Major bank approved credit cards: VISA, MasterCard, Discover  Credit card slip  Totaled and recorded at the end of each week  Source Document – Cash Register Tape

27. 1. Omni Imports creates a cc slip for each cc sale 2. All cc slips sent to bank each week with weekly deposit to Omni’s bank 3. Omni’s bank accepts the cc slips the same way it accepts cash for deposit 4. If a cc was issued by another bank, Omni’s bank sends the cc slip to the issuing bank 5. The issuing bank bills the customer and collects the amount owed 6. The bank that accepts and processes the cc slip for a business charges a fee for the service 7. The fee is included on Omni’s monthly bank statement

28.  November 4  Recorded cash and credit card sales, $5,460.00, plus sales tax, $327.60; total $5,787.60. Cash Register Tape No. 4.  Cash & cc sales recorded in same deposit  Cash Register Tape is numbered based on the day of the month (T4)  The month of November started on a Wednesday – short week of sales Cash Sales Tax Payable 5,787.60 327.60 Sales 5,460.00

29.  Sale on account  A sale where cash is received later  Invoice  Prepared when merchandise is sold on account  Describes the goods, quantity, and price  Sales Invoice - Source document for recording a sale on account (CONCEPT: Objective Evidence) A.k.a. – sales ticket, sales slip  3 copies:  Customer, Shipping Dept., Accounting Dept.

30.  November 3  Sold merchandise on account to Children’s paradise, $816.00, plus sales tax, $48.96; total, $864.96. Sales Invoice No. 76.  Even though cash is not received yet we still record the sale (CONCEPT: Realization of Revenue) Accounts Receivable Sales Tax Payable 864.96 48.96 Sales 816.00

31.  November 6  Received cash on account from Fiesta Costumes, $2,162.40, covering $69. Receipt No. 90.  Omni prepares a receipt whenever cash is received and uses it as the source document  2 copies: customer, accounting dept. Cash 2,162.40 Accounts Receivable 2,162.40

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33. Lesson 11.2

34.  Prove a Journal 1. Rule single line above last line of all amount columns 2. Date 3. Write “Carried Forward” in the account title column 4. Check mark in “Post. Ref.” column 5. Total all amount columns below single underline 6. Verify that the Debits = Credits using the form on page 260 7. Double underline below all totals in the amount columns Account totals are verified as correct

35.  Bring amounts forward to next Journal page 1. Write the new Journal page number on both pages of journal (expanded journal goes on two pages) 2. Date (same as last line of previous page) 3. Write “Brought Forward” in the account title column 4. Check mark in “Post. Ref.” column 5. Bring all totals forward from previous journal page

36.  Prove the Journal page at the end of the month 1. Single underline 2. “Totals” written in account title column 3. Total all amount columns 4. Verify that the Debits = Credits using the form on page 260 5. Double underline below totals

37.  Prove cash at the end of the month  Using the form on page 264: 1. Add all cash received during the month (Cash debit column) to the previous cash balance and subtotal 2. Subtract all cash spend during the month (Cash credit column) to the subtotal and total 3. Match this amount with the amount on your last unused check stub  Cash balance on your Journal MUST agree with the cash balance on your last unused check stub

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