Special Journals: Purchases and Cash Payments

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Special JournalsPurchases and Cash Payments

• Chapter 10

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Special Journals
Special journals assist business owners,
managers, and accounting personnel in efficient
record keeping and better internal control.
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Learning Objective 1

• Calculating net purchases.

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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.
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Learning Unit 10-1
Accounts Affected Category
Rules
Purchases Cost
Dr. 4,000
Accounts Payable Liability
Cr. 4,000
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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.

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Learning Unit 10-1
Accounts Affected Category
Rules
Accounts Payable Liability
Dr. 500 Purchases
Returns Contra- Cr. 500 and
Allowances Cost
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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.
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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.
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Learning Objective 2

• Journalizing transactions
• in a purchases journal.

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Learning Unit 10-2

• The following steps are taken in purchasing
  merchandise and recording purchases
• Prepare a Purchase Requisition
  This is a request that merchandise be purchased
  for resale to customers.
• Prepare a Purchase Order Check
  price lists for the best purchase deal.

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Learning Unit 10-2

• Prepare a Sales Invoice
  This is done by the seller company.
• Prepare a Receiving Report
  This is done when the goods are received.
• Verifying the Numbers
  All numbers are cross-checked for accuracy
  prior to recording and payment.

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Learning Objective 3

• Posting from a purchases journal
• to the accounts payable subsidiary
• ledger and the general ledger.

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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.

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Purchases Journal
Accounts Date Account
Payable Purchases 20xx Credited
Terms Credit Debit July 1 XYZ Co.
2/10, n/30 1,000 Supplies
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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)
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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.

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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.

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Learning Objective 4

• Preparing, journalizing, recording,
• and posting a debit memorandum.

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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.

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Learning Unit 10-2
Accounts Affected Category Rules
Accounts Payable Liability
Dr. Purchases Returns Contra-
Cr. and Allowances Cost Debit memo 1
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Learning Objective 5

• Journalizing and posting
• from a cash payments journal.

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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.

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Learning Objective 6

• Preparing a schedule
• of accounts payable.

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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.

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End of Chapter 10