1. Chapter 10 Journalizing Purchases and Cash Payments

2. 10.1 Journalizing Purchases of Merchandise for Cash

3. A business owned by 1 person is known as a proprietorship A business owned by 1 person is known as a proprietorship A business in which 2 or more persons combine their assets and skills is a partnership. A business in which 2 or more persons combine their assets and skills is a partnership. Each member of a partnership is called a partner. Each member of a partnership is called a partner.

4. A business that purchases and sells goods is called a merchandising business. A business that purchases and sells goods is called a merchandising business. A merchandising business that sells to those who use or consume the goods is called a retail merchandising business. A merchandising business that sells to those who use or consume the goods is called a retail merchandising business. Goods that a merchandising business purchases to sell are called merchandise. Goods that a merchandising business purchases to sell are called merchandise. A business that buys and resells merchandise to retail merchandising businesses is called a wholesale merchandising business. A business that buys and resells merchandise to retail merchandising businesses is called a wholesale merchandising business.

5. Starting to use 11 column journal Starting to use 11 column journal Typically used in a small business where one person records all of the transactions Typically used in a small business where one person records all of the transactions Special amount columns are frequently used accounts. Special amount columns are frequently used accounts.

6. The prices a business pays for goods it purchases to sell is called cost of merchandise. The prices a business pays for goods it purchases to sell is called cost of merchandise. The amount added to the cost of merchandise to establish the selling price is called markup. The amount added to the cost of merchandise to establish the selling price is called markup. Accounts for the cost of merchandise are kept in a separate division of the general ledger. Accounts for the cost of merchandise are kept in a separate division of the general ledger.

7. A business from which merchandise is purchased or supplies or other assets are bought is called a vendor. A business from which merchandise is purchased or supplies or other assets are bought is called a vendor. The account used for recording the cost of merchandise is called Purchases. – temporary account-debit balance because it reduces capital The account used for recording the cost of merchandise is called Purchases. – temporary account-debit balance because it reduces capital

8. 10.2 Journalizing Purchases of Merchandise on Account and Buying Supplies

9. A transaction where merchandise is bought but paid later is called a purchase on account. A transaction where merchandise is bought but paid later is called a purchase on account. An invoice used as a source document for recording a purchase on account transaction is called a purchase invoice – Objective Evidence An invoice used as a source document for recording a purchase on account transaction is called a purchase invoice – Objective Evidence Vendors not listed separately in the ledger just Accounts Payable – Credit Balance Vendors not listed separately in the ledger just Accounts Payable – Credit Balance