PURCHASE JOURNALS AND CASH PAYMENT

JOURNALS Chapter 9

Accounting 1

DO NOW:

In your notebooks:

Of all accounts in the general ledger, which account do you believe is impacted most?

Why this account in particular?Do you think this would constitute a special

journal?

9-2 JOURNALIZING CASH PAYMENTS USING A CASH PAYMENTS JOURNAL Cash payments journal: special journal

used to record only cash payment transactions

May be designed to accommodate a business’ frequent cash payment transactions

Special amount column for this general ledger account

Many cash transactions affect accounts payable, so a special amount column is also used for that general ledger account

Source document is usually a check

9-2 JOURNALIZING CASH PAYMENTS USING A CASH PAYMENTS JOURNAL

Cash discount: deduction vendor allows on invoice amount to encourage prompt payment

Purchase discount: cash discount on purchases taken by a customerwhen taken, a customer pays less than

invoice amount previously recorded in purchases account

Reduces customer’s cost of merchandise purchased

General amount column: journal amount column not headed with account title

THE CASH PAYMENTS JOURNAL P. 242 and 243 Includes:

A general debit and credit column. For occasional cash transactions, such as rent

3 special columns1. Accounts Payable debit

For payments made on accounts payables

2. Purchase discount creditA cash discount received when you pay cash for purchases

of merchandise

3. Cash creditA deduction given by the vendor to encourage prompt

payment

P. 243

THE CASH PAYMENTS JOURNAL

Supplies not recorded in purchases account because supplies aren’t intended for sale

Cash register tapes and price tags are examples of supplies used in a business

THE CASH PAYMENTS JOURNAL

CASH PAYMENTS JOURNAL PAGE ?

  DATE

 

ACCT. TITLECK. NO.

POST. REF.

GENERAL JOURNAL

ACCOUNTS PAYABLE

DEBIT

PURCHASES DISCOUNT

CREDITCASH

CREDIT    DEBIT CREDIT

  2013                    

1 1

2 2

3 3

4 4

5                     5

6                     6

7                     7

8                     8

THE CASH PAYMENTS JOURNALPage 243

Cash payment for expense Cash payment for supplies

THE CASH PAYMENTS JOURNAL: CASH PAYMENT FOR EXPENSE (P. 243)

CASH PAYMENTS JOURNAL PAGE ?

  DATE

 

ACCT. TITLECK. NO.

POST. REF.

GENERAL JOURNAL

ACCOUNTS PAYABLE

DEBIT

PURCHASES DISCOUNT

CREDITCASH

CREDIT    DEBIT CREDIT

  2013                    

1 Nov 2 Advertising Expense 292 150.00 150.00 1

2 2

3 3

4 4

5                     5

6                     6

7                     7

8                     8

November 2. Paid cash for advertising, $150.00. Check No. 292

THE CASH PAYMENTS JOURNAL: CASH PAYMENT FOR SUPPLIES (P. 243)

CASH PAYMENTS JOURNAL PAGE ?

  DATE

 

ACCT. TITLECK. NO.

POST. REF.

GENERAL JOURNAL

ACCOUNTS PAYABLE

DEBIT

PURCHASES DISCOUNT

CREDITCASH

CREDIT    DEBIT CREDIT

  2013                    

1 Nov 2 Advertising Expense 292 150.00 150.00 1

2 Nov 5 Supplies—Office 293 94.00 94.00 2

3 3

4 4

5                     5

6                     6

7                     7

8                     8

November 6. Paid cash for office supplies, $94.00. Check No. 293

THE CASH PAYMENTS JOURNAL

Cash payment for expense Cash payment for supplies

Practice:9 – 2 WTOct 1st and 7th transactions

THE CASH PAYMENTS JOURNAL: CASH PAYMENTS FOR PURCHASES

Page 244 Cash payment for purchases Merchandise usually purchased on

account (use purchase journal)Might be cash because

Discounts make it a better choice to pay cashNew customer, so credit not offered by the

vendorPoor paying history, so credit rescinded by the

vendor Business would pay vendor with check before

merchandise is shipped or delivered

THE CASH PAYMENTS JOURNAL List price: retail price listed in catalog or

on Internet site

Trade discount: reduction in list price granted to customersGiven when merchandising business

purchases number of products from manufacturer

Invoice amount: amount after trade discount is deducted from list price only the invoice amount is used in a journal

entry

THE CASH PAYMENTS JOURNAL: CASH PAYMENTS WITH TRADE DISCOUNTS

Trade discount – Reduces list priceDue to quantities being purchased – the

more purchased, the lower the price

List Price x Trade Discount Rate

= Trade Discount

1500.00 x 60% = 900.00

Total List Price - Trade Discount = Invoice Amount

1500.00 - 900.00 = 600.00

THE CASH PAYMENTS JOURNAL: PURCHASED MERCHANDISE FOR CASH (P. 244)

CASH PAYMENTS JOURNAL PAGE ?

  DATE

 

ACCT. TITLECK. NO.

POST. REF.

GENERAL JOURNAL

ACCOUNTS PAYABLE

DEBIT

PURCHASES DISCOUNT

CREDITCASH

CREDIT    DEBIT CREDIT

  2013                    

1 Nov 2 Advertising Expense 292 150.00 150.00 1

2 Nov 5 Supplies—Office 293 94.00 94.00 2

3

11 7 Purchases 301 600.00 600.00 11

12                     12

13                     13

14                     14

15                     15

November 7. Purchased merchandise for cash $600.00, Check #301.

THE CASH PAYMENTS JOURNAL: CASH PAYMENT FOR SUPPLIESWITH DISCOUNT (P. 243)

Practice:

9-2 WTOctober 11

THE CASH PAYMENTS JOURNAL: CASH PAYMENTS FOR PURCHASES WITH A PURCHASE DISCOUNT

Page 245 Discounts are offered for prompt payment onMerchandise purchases Invoices will show the terms of sale:

Example: 2/10,n/302/10: 2% of the invoice amount may be

deducted if paid within 10 days

n/30: Net thirty – the total invoice amountmust be paid within 30 days

THE CASH PAYMENTS JOURNAL: CASH PAYMENTS FOR PURCHASES WITH A PURCHASE DISCOUNT

Example: 2/10,n/30

Calculate:

Invoice amount - $1,000

Invoice date – 3/1/2013

Terms 2/10, n/30

If paid by March 10: Pay discount: $1,000 - $20 = $980 If paid after March 10: Pay net amount - $1,000 If paid after March 31: Your payment is late and may result

in finance charges

Purchase Invoice Amt

x Purchase Discount

Rate

= Purchase Discount

$1,000 x 2% = $20Purchase

Invoice Amount- Purchase

Discount= Cash Amount

After Discount

$1,000 - $20 = $980

THE CASH PAYMENTS JOURNAL: CASH PAYMENTS FOR PURCHASES WITH A PURCHASE DISCOUNT

Contra account: account that reduces related account on financial statement

Purchases discounts recorded in general ledger account titled Purchases Discount Purchases discount is contra account to

Purchases Since contra accounts are deductions from

related accounts, contra account normal balances are opposite the normal balances of related accounts Therefore, normal balance of Purchases Discount

account is a credit Even though trade discounts aren’t recorded, cash

discounts are recorded

CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS

Page 245

Purchase Discounts

THE CASH PAYMENTS JOURNAL: CASH PAYMENTS FOR PURCHASES WITH A PURCHASE DISCOUNT

Page 245 Calculate your Purchase Discount: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.

Purchase Invoice Amt

x Purchase Discount Rate

= Purchase Discount

$498.00 x 2% = $9.96

Purchase Invoice Amount

- Purchase Discount

= Cash Amount

After Discount

$498.00 - $9.96 = $488.04

THE CASH PAYMENTS JOURNAL: CASH PAYMENT FOR SUPPLIES (P. 243)

CASH PAYMENTS JOURNAL PAGE ?

  DATE

 

ACCT. TITLECK. NO.

POST. REF.

GENERAL JOURNAL

ACCOUNTS PAYABLE

DEBIT

PURCHASES DISCOUNT

CREDITCASH

CREDIT    DEBIT CREDIT

  2013                    

1 Nov 2 Advertising Expense 292 150.00 150.00 1

2 Nov 5 Supplies—Office 293 94.00 94.00 2

3

11 Nov 8 Gulf Craft Supply 302 498.00 9.96 488.04 11

12                     12

13                     13

14                     14

15                     15

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.

THE CASH PAYMENTS JOURNAL: CASH PAYMENT FOR SUPPLIESWITH DISCOUNT (P. 243)

Some vendors don’t offer purchases discounts

Business may not have cash available to take advantage of purchases discount In both cases, full purchase invoice is paid

Practice:Finish 9-2 WTComplete 9-2 OYO