chapter 9 accounting 1. in your notebooks: of all accounts in the general ledger, which account do...
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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 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.