PURCHASE JOURNALS AND CASH PAYMENT

JOURNALS Chapter 9

Accounting 1

DO NOW:

Read about Office Max (p. 233) Be prepared to discuss answers to

questions

Read about corporations (p. 234)

HOBBY SHACK, INC. Owner – Janice Kellogg

Sells a wide variety of art and hobby supplies to individuals, schools, and businesses

CorporationHas stockholders who have investedExists independent of its owners

Will continue beyond Janice’s lifetime

HOBBY SHACK, INC. A merchandising business

Merchandise – goods that a business purchases to sell

Merchandising business – a business that purchases and sells goods

Retail merchandising business – buys and sells merchandise to those who consume the goods

Wholesale merchandising business – buys and resells merchandise to retail merchandising businesses

USING SPECIAL JOURNALS There are many kinds of journals that

can be used and the choice depends on the needs of the business.

The greater a business’s daily transactions, the more “special journals” that may be used

Special Journal – a journal used to record only one kind of transaction

HOBBY SHACK’S SPECIAL JOURNALS

Hobby Shack uses five (5) special journals

Purchase Journals All purchases of merchandise on account

Cash Payment Journal All cash payments

Sales Journal All sales of merchandise on account

Cash Receipts Journal All cash receipts

General Journal All other transactions

PURCHASING MERCHANDISE Vendor – a business from which

merchandise is purchased or supplies or other assets are bought

Cost of merchandise – the price a business pays for goods it purchases to sellSelling price must be greater than cost of

merchandise for business to make profitMarkup: amount added to cost of

merchandise to establish selling price Only markup increases capital

PURCHASING MERCHANDISE

Costs of merchandise are kept separatelyChart of Accounts, p. 2315000 accounts

“Purchases” – A temporary account used for purchasing merchandise ONLY

Debit increases, Credit decreases (p. 236)Normal debit balance because it takes from

capital

Accounting Concept Historical PriceApplied when actual amount paid for

merchandise or other items bought is recorded

SOURCE DOCUMENT: PURCHASE INVOICE

Pay cash for merchandise OR Purchase on account – a transaction in which the

merchandise purchased is to be paid for later Accounts payable account (p. 236)

Purchases journal – special journal used to record only purchases of merchandise on account

Amount column has two account titles in heading:1. Purchases Dr.2. Accts. Pay. Cr.

Special amount column – journal amount column headed with account title ; used for frequently occurring trans.

Eliminates writing general ledger account titles in Account Title Column and saves time

SOURCE DOCUMENT: PURCHASE INVOICE All purchases on account transactions are recorded in

purchases journal If purchase made for cash, transaction NOT recorded in

purchases journal

Every purchase on account will have a purchase invoice This is a form describing goods sold, quantity, and price and is used

as a source document for recording a purchase on account transaction (Objective Evidence)

Review p. 238

Steps to “check” a purchase invoice: Stamp date received Place check mark by each amount Initial total Review terms of sale: agreement between buyer and seller

about pmt.

THE PURCHASE JOURNALPURCHASES JOURNAL PAGE  

  DATE ACCOUNT CREDITED PURCH. NO. POST. REF.PURCHASES DR.ACCTS. PAY. CR.  

               

1             1

2             2

3             3

4             4

5             5

JOURNALIZING IN THE PURCHASE JOURNAL All transactions recorded in purchase

journal are a debit of purchases and a credit of accounts payable

Must always write the vendor name in the account title column

Always total and rule at the end of the month

Review p. 239 and 240

PURCHASING MERCHANDISE ON ACCOUNT (P. 239)

PURCHASES JOURNAL PAGE  

  DATE ACCOUNT CREDITED PURCH. NO. POST. REF.PURCHASES DR.ACCTS. PAY. CR.  

  2013             

1 Nov  2  Crown Distributing 83   2039.00 1

2             2

3             3

4             4

5             5

November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83.

At the end of the month, the Purchases Journal is totaled and ruled.

PRACTICE 9-1 WT 9-1 OYO 9-1 App 9-1