LESSON 9-1 - Journalizing Purchases
Using a Purchases Journal
 Service business vs. merchandising business
 Service business sells services for a fee – nail salon, attorney
 Merchandising business purchases and sells goods – t-shirts,
sports equipment
 Retail merchandising business – sells goods to those who use or
consume the goods (Target, Wal Mart, etc.)
 Wholesale merchandising business – buys and resells
merchandise to retail merchandising businesses (company that sells
merchandise to Target or Wal Mart)
 Merchandising business uses many of the same accounts as
a service business, but it will have additional accounts for the
purchase and sale of merchandise (chart of accounts, pg.
231)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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Business Structures
 Sole Proprietorship
 Owned by one person – limits resources for the business
 Corporation – organization with the legal rights of a person and which
many person may own
 Formed by receiving approval from a state or federal agency
 Can own property, incur liabilities, and enter into contracts in its own name




Share of stock – a unit of ownership
Capital stock – total shares of ownership
Stockholder – an owner of one or more shares of a corporation
Biggest difference between proprietorship and corporation is capital
accounts
 Special Journal – used to record only one kind of transaction
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
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PURCHASING MERCHANDISE
page 236
 Cost of merchandise – price a business pays for goods it
purchases
 Mark-up – amount added to cost of merchandise to
establish selling price
 Mark-up is needed in order to earn a profit
 Vendor – a business from which merchandise or other
supplies is bought
Purchases – account used for
recording the cost of merchandise
-cost account (reduces capital)
-temporary account
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
4
PURCHASES ON ACCOUNT
page 236
 Purchases on account – transaction in which the
merchandise purchased is to be paid for later
 CONCEPT: Historical Cost – actual amount paid for merchandise or
other items bought is recorded
 Businesses that purchase from many vendors have many accounts for
vendors
 Accounts Payable summarizes the total amount owed all vendors
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
5
PURCHASES JOURNAL
page 237
 Purchases Journal – special journal used to record only
purchases of merchandise on account
 Special amount column – journal amount column headed
with an account title
 Special amount columns are used for frequently occurring transactions
 Eliminates writing general ledger account titles in the Account Title
column and saves time
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
6
PURCHASE INVOICE – form describing the
page 238
goods sold, quantity, and price
1
4
2
3
1. Stamp the date received and
purchase invoice number.
3. Initials of the person who
checked the invoice.
2. Place a check mark by each amount.
4. Review the vendor’s terms.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
7
PURCHASING MERCHANDISE ON
ACCOUNT
page 239
November 2. Purchased merchandise on account from Crown
Distributing, $2,039.00. Purchase Invoice No. 83.
2
1
1.
2.
3.
4.
3
4
Write the date.
Write the vendor name.
Write the purchase invoice number.
Write the amount of the invoice.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
8
TOTALING AND RULING A PURCHASES
JOURNAL
page 240
1
4
3
5
2
1. Rule a single line across
the amount column.
2. Write the date.
3. Write the word Total.
4. Add the amount column.
5. Write the total.
6. Rule double lines across
the amount column.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 9-1
9
TERMS REVIEW
 merchandise
 merchandising business
 retail merchandising
business
 wholesale
merchandising business
 corporation
 share of stock
 capital stock
 stockholder
page 241









special journal
cost of merchandise
markup
vendor
purchase on account
purchases journal
special amount column
purchase invoice
terms of sale
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
LESSON 9-2
Journalizing Cash
Payments Using a Cash
Payments Journal
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
11
CASH PAYMENTS JOURNAL
page 242
 Cash Payments Journal – special journal used to record
only cash payment transactions
 Cash discount – deduction that a vendor allows on the
invoice amount to encourage prompt payment
 Purchase discount – cash discount on purchases taken by a
customer
 General amount column – amount column that is not
headed with an account title (ex. Monthly rent)
 Source document is usually a check
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-2
12
CASH PAYMENT OF AN EXPENSE
page 243
November 2. Paid cash for advertising, $150.00. Check No. 292.
1
1.
2.
3.
4.
5.
2
3
4
5
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-2
13
BUYING SUPPLIES FOR CASH
page 243
November 5. Paid cash for office supplies, $94.00. Check No. 293.
1
1.
2.
3.
4.
5.
2
3
Write the date.
Write the account title.
Write the check number.
Write the debit amount.
Write the credit amount.
4
5
Supplies are not recorded in the Purchases
account because supplies are not intended for
sale.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-2
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CASH PAYMENTS FOR PURCHASES
page 244
November 7. Paid Cash to XYZ Company for merchandise with a
list price of $1,500.00, less a 60% trade discount. Check No. 301.
2
1
1.
2.
3.
4.
5.
3
4
5
100% - 60% discount= 40%
Invoice amount
Write the date.
Write the account title.
$1500.00 x 40% = $600.00
Write the check number.
List price – retail price listed in a catalog or on website
Write the debit amount. Trade discount – reduction in the list price granted to
Write the credit amount. customers
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-2
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CASH PAYMENTS ON ACCOUNT WITH
PURCHASES DISCOUNTS
 2/10, n/30 – common term of sale read two ten, net thirty
 Two ten means that 2% of the invoice amount may be deducted if
the invoice is paid within 10 days of the invoice date
 Net Thirty means that the total invoice amount must be paid within
30 days
 Purchases discount – general ledger account used to
record discounts on purchases
 Contra account – account that reduces a related account
 Balance is opposite the balance of the related account (Purchases –
normal debit balance; Purchases discount – normal credit balance
 Cash discounts must be recorded because they decrease the
recorded invoice amount
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
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CASH PAYMENTS ON ACCOUNT WITH
PURCHASES DISCOUNTS
November 8. Paid cash on account to Gulf Craft Supply, $488.04,
covering Purchase Invoice No. 82 for $498.00, less 2% discount,
$9.96. Check No. 302.
5
1
1.
2.
3.
4.
5.
6.
2
page 245
6
4
3
Write the date.
Write the account title of the vendor.
Write the check number.
Write the debit amount.
Write the credit amount.
Write the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-2
17
CASH PAYMENTS ON ACCOUNT
WITHOUT PURCHASES DISCOUNTS
page 246
November 13. Paid cash on account to American Paint, $2,650.00,
covering Purchase Invoice No. 77. Check No. 303.
1
2
4
5
3
1.
2.
3.
4.
5.
Write the date.
Write the vendor account title.
Write the check number.
Write the debit amount.
Write the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-2
LESSON 9-3
Performing Additional
Cash Payments
Journal Operations
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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PETTY CASH REPORT
 Errors may be made when making payments from a petty
cash fund
 Cash short – petty cash amount on hand is less than a
recorded amount
 Cash over - petty cash amount on hand is greater than a
recorded amount
 Cash Short and Over – temporary account to record petty
cash short and over
Cash Short and Over
Debit
Cash short
Credit
Cash over
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
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PETTY CASH REPORT
1. Write the date and
1
custodian name.
2. Write the fund total.
3. Summarize petty cash
payments.
4. Calculate and write the
3
total payments.
5. Calculate and write the
recorded amount on
hand.
5
6. Write the actual amount of cash on hand.
7. Subtract the actual amount on hand from the
recorded amount on hand and write the amount.
8. Write the total of the replenish amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 248
2
4
6
7
8
LESSON 9-3
21
REPLENISHING A PETTY CASH FUND
page 249
1.
2.
3.
4.
5.
Date
Account titles
Check number
Expense amounts
Cash short as a debit;
cash over as a credit
6. Total cash payment
4
5
6
1
2
3
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-3
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TOTALING, PROVING, AND RULING A CASH
PAYMENTS JOURNAL PAGE TO CARRY TOTALS
page 250
FORWARD
1
2
3
4
1.
Rule a single line.
2.
Write the date.
3.
Write the words Carried Forward in the Account Title column.
4.
Place a check mark in the Post. Ref. column.
5.
Write each column total.
6.
Rule double lines.
You must verify that total debits = total credits.
5
6
A journal is proved and
ruled whenever a page is
full and always at the end
of the month.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-3
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STARTING A NEW CASH PAYMENTS
JOURNAL PAGE
page 251
1
2
1.
2.
3.
4.
5.
3
4
5
Write the journal page number.
Write the date.
Write the words Brought Forward in the Account Title column.
Place a check mark in the Post. Ref. column.
Record the column totals.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-3
TOTALING, PROVING, AND RULING A CASH
PAYMENTS JOURNAL AT THE END OF A
MONTH
24
page 252
1
2
3
1.
2.
3.
4.
5.
Rule a single line.
Write the date.
Write the word Totals in the Account Title column.
Write each column total.
Rule double lines.
4
5
You must verify that total debits = total credits.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-3
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TERMS REVIEW
page 253
 cash short
 cash over
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-3
LESSON 9-4 - Journalizing Other
Transactions Using a General Journal
 Not all transactions can be recorded in special journals
 These entries are recorded in the general journal (ex. Buying
supplies on account)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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MEMORANDUM FOR BUYING SUPPLIES
ON ACCOUNT
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
page 254
LESSON 9-4
28
BUYING SUPPLIES ON ACCOUNT
page 255
November 6. Bought store supplies on account from Gulf Craft
Supply, $210.00. Memorandum No. 52.
2
4
3
7
1
1. Write the date.
2. Write the account title.
3. Write the memorandum
number.
4. Write the debit amount.
5
6
5. Write the account title and
vendor name.
6. Place a diagonal line in the
Post. Ref. column.
7. Write the credit amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-4
29
DEBIT MEMORANDUM FOR PURCHASES
RETURNS AND ALLOWANCES
 Purchase return – credit allowed for the purchase price of returned
merchandise, resulting in a decrease in the customer’s accounts
payable
 Purchases Allowance – credit allowed for part of the purchase price of
merchandise that is not returned, resulting in a decrease in the
customer’s accounts payable
 Merchandise is damaged but still usable – reduced price
 Debit memorandum – form prepared by the customer showing the
price deduction taken by the customer for returns and allowances
(source document – objective evidence)
 Customer records the amount as a debit (deduction) to the vendor account
to show decrease in amount owed
 Purchase Returns and Allowances – decreases amount of
purchases
 Contra account to Purchases – normal credit balance
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-1
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DEBIT MEMORANDUM FOR PURCHASES
page 256
RETURNS AND ALLOWANCES
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-4
31
JOURNALIZING PURCHASES RETURNS
AND ALLOWANCES
page 257
November 28. Returned merchandise to Crown Distributing, $252.00,
covering Purchase Invoice No. 80. Debit Memorandum No. 78.
2
5
1
4
6
1. Write the date.
2. Write the account title and
vendor name.
3. Place a diagonal line in the
Post. Ref. column.
4.
5.
6.
7.
3
7
Write debit memorandum number.
Write the amount.
Write Purchases Returns and Allow.
Write the amount.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-4
32
TERMS REVIEW
page 258
 purchases return
 purchases allowance
 debit memorandum
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 9-4