Special Journals:Purchases and Cash Payments Chapter 10
Special Journals Special journals assist business owners, managers, and accounting personnel in efficient record keeping and better internal control.
Calculating net purchases. Learning Objective 1
Learning Unit 10-1 Purchases = Amount of units purchased times the cost of each unit It is the amount that is debited to the purchases account in the purchases journal entry. Normal balance is a debit.
Learning Unit 10-1 Accounts Affected Category Rules Purchases Cost Dr. 4,000 Accounts Payable Liability Cr. 4,000
Learning Unit 10-1 • The Purchases Returns and Allowances account is used to record a reduction of an amount owed. • A debit memo is issued for returned, damaged, or defective purchased merchandise. • The amount of these reductions and refunds is credited in the journal entry. • Normal balance is a credit.
Learning Unit 10-1 Accounts Affected Category Rules Accounts Payable Liability Dr. 500 Purchases Returns Contra- Cr. 500 and Allowances Cost
Learning Unit 10-1 Purchases discount = A percent decrease in the amount paid to a supplier. All payments should be timely to take advantage of this discount.
Learning Unit 10-1 F.O.B. destination: The seller is responsible for freight. F.O.B. shipping point: The buyer is responsible for freight.
Journalizing transactions in a purchases journal. Learning Objective 2
Learning Unit 10-2 • The following steps are taken in purchasing merchandise and recording purchases: • Prepare aPurchase Requisition: This is a request that merchandise be purchased for resale to customers. • Prepare aPurchase Order: Check price lists for the best purchase deal.
Learning Unit 10-2 • Prepare a Sales Invoice:This is done by the seller company. • Prepare aReceiving Report: This is done when the goods are received. • Verifying the Numbers: All numbers are cross-checked for accuracy prior to recording and payment.
Posting from a purchases journal to the accounts payable subsidiary ledger and the general ledger. Learning Objective 3
Learning Unit 10-2 • Recorded purchases are posted in total to the Purchases account and the Accounts Payable account. • They are also recorded as credits to individual creditors in the Accounts Payable account.
Purchases Journal Accounts Date Account Payable Purchases 20xx Credited Terms Credit Debit July 1 XYZ Co. 2/10, n/30 1,000 Supplies
Learning Unit 10-2 Special Journals Purchases Journal Purchases of inventory for resale on account Cash Payments Journal All payments of cash (cash disbursements journal)
Learning Unit 10-2 • Purchase transaction amounts are posted to each supplier in the purchases journal and accounts payable subsidiary ledgers. • This process allows up-to-date records of accounts payable balances.
Learning Unit 10-2 • The purchases journal records all purchases on account (credit purchases only). • Each credit purchase transaction is posted to each accounts payable supplier as a credit. • The totals of the Accounts Payable, and Purchases columns are posted to each of these general ledger accounts. • Cash discount terms are listed.
Preparing, journalizing, recording, and posting a debit memorandum. Learning Objective 4
Learning Unit 10-2 • What is a debit memorandum? • It is a record of purchases, returns and allowances showing amounts that were deducted from the balance owed to creditors. • It relates to a contra-expense account with a normal credit balance.
Learning Unit 10-2 Accounts Affected Category Rules Accounts Payable Liability Dr. Purchases Returns Contra- Cr. and Allowances Cost Debit memo #1
Journalizing and posting from a cash payments journal. Learning Objective 5
Learning Unit 10-3 • The cash payments journal records all payments made in cash. • Accounts Payable, Purchase Discount, and Cash column totals are posted to the general ledger. • Sundry is a miscellaneous accounts column that provides flexibility for reporting transactions.
Preparing a schedule of accounts payable. Learning Objective 6
Learning Unit 10-3 • Accounts Payable is the controlling account in the general ledger. • At the end of the month, the total owed in Accounts Payable should equal the sum owed to the individual creditors that are listed on the schedule of accounts payable.