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Chapter Ten The Sales Journal and the Purchases Journal.

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Presentation on theme: "Chapter Ten The Sales Journal and the Purchases Journal."— Presentation transcript:

1 Chapter Ten The Sales Journal and the Purchases Journal

2 Copyright © Houghton Mifflin Company. All rights reserved Performance Objectives 1.Describe the specific accounts used by a merchandising firm 2.Journalize transactions in a sales journal 3.Post sales journal transactions to an accounts receivable ledger and a general ledger 4.Prepare a schedule of accounts receivable

3 Copyright © Houghton Mifflin Company. All rights reserved Performance Objectives 5.Journalize sales returns and allowances, including credit memorandums and returns involving sales tax, in a general journal, and post to the accounts receivable ledger and general ledger 6.Journalize transactions in a three-column purchases journal 7.Post purchases journal transactions to an accounts payable ledger and a general ledger

4 Copyright © Houghton Mifflin Company. All rights reserved Performance Objectives 8.Prepare a schedule of accounts payable 9.Journalize transactions involving purchases returns and allowances in a general journal, and post to the accounts payable ledger and general ledger 10.Describe the procedures for handling freight charges on merchandise and other goods

5 Copyright © Houghton Mifflin Company. All rights reserved Special Journals Books of original entry in which specialized types of repetitive transactions are recorded –Sales journal –Purchases journal –Cash receipts journal –Cash payments journal

6 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 1 Describe the specific accounts used by a merchandising firm

7 Copyright © Houghton Mifflin Company. All rights reserved Merchandising Accounts Contra Accounts

8 Copyright © Houghton Mifflin Company. All rights reserved Merchandise Inventory A stock of goods (an asset account) that a company buys and intends to resell, in the same physical condition, at a profit

9 Copyright © Houghton Mifflin Company. All rights reserved Sales Tax A tax levied by a state or city government on the retail sale of goods and services Paid by the consumer but collected by the retailer Collection of tax recorded in Sales Tax Payable account

10 Copyright © Houghton Mifflin Company. All rights reserved Sales Account A revenue account for recording the sale of merchandise

11 Copyright © Houghton Mifflin Company. All rights reserved Sales Returns and Allowances Account The account a seller uses to record the physical return of merchandise by customers or a reduction in a bill because merchandise was damaged Treated as a deduction from sales Usually evidenced by a credit memorandum issued by the seller

12 Copyright © Houghton Mifflin Company. All rights reserved Sales Discount Account An account that records a deduction from the original price, granted by the seller to the buyer for the prompt payment of an invoice Sales discount is treated as a deduction from sales

13 Copyright © Houghton Mifflin Company. All rights reserved Purchases Account An account for recording the cost of merchandise acquired for resale

14 Copyright © Houghton Mifflin Company. All rights reserved Purchases Returns and Allowances Account An account that records a company’s return of merchandise it has purchased or a reduction in the bill because of damaged merchandise Treated as a deduction from Purchases

15 Copyright © Houghton Mifflin Company. All rights reserved Purchases Discount Account An account that records cash discounts granted by suppliers in return for prompt payment Treated as a deduction from Purchases

16 Copyright © Houghton Mifflin Company. All rights reserved Freight In Account The account used to record transportation charges on incoming merchandise intended for resale

17 Copyright © Houghton Mifflin Company. All rights reserved Invoices Business forms prepared by the seller that list the items shipped, their cost, the terms of the sale, and the mode of shipment May state freight charges Issued by seller Source document that serves as evidence for recording the transaction

18 Copyright © Houghton Mifflin Company. All rights reserved Invoices—Whose Point of View? Seller’s point of view: –Sales invoice –Shows increase in sales revenue Buyer’s point of view: –Purchases invoice –Shows increase in purchases

19 Copyright © Houghton Mifflin Company. All rights reserved Customers and Vendors People or businesses we buy from are called: –Suppliers –Creditors –Vendors People or businesses who buy from us are called: –Customers

20 Copyright © Houghton Mifflin Company. All rights reserved Invoices

21 Copyright © Houghton Mifflin Company. All rights reserved Invoices

22 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 2 Journalize transactions in a sales journal

23 Copyright © Houghton Mifflin Company. All rights reserved Sales Journal A special journal for recording the sale of merchandise on account only Abbreviated S in Post. Ref. column of ledgers DR = CR for every line

24 Copyright © Houghton Mifflin Company. All rights reserved Columns in the Sales Journal Date Invoice Number Customer’s Name Post. Ref. Accounts Receivable Debit Sales Tax Payable Credit Sales Credit

25 Copyright © Houghton Mifflin Company. All rights reserved Transactions in a Sales Journal with More Than One Column

26 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 3 Post sales journal transactions to an accounts receivable ledger and a general ledger

27 Copyright © Houghton Mifflin Company. All rights reserved Some Definitions Controlling account –An account in the general ledger that summarizes the balances of a subsidiary ledger Accounts Receivable –A controlling account in the general ledger Subsidiary ledger –A group of accounts representing individual subdivisions of a controlling account Accounts receivable ledger –A subsidiary ledger that lists the individual accounts of charge customers in either alphabetical or numerical order

28 Copyright © Houghton Mifflin Company. All rights reserved Posting to the General Ledger 1.Draw a single line below the amount columns to indicate the last date in the period 2.Draw double lines below the Date column, Post. Ref. column, and column totals 3.Check that DR = CR 4.Post each column total as a summarizing entry to general ledger at the end of the period 5.After posting, write account numbers in parentheses below column totals

29 Copyright © Houghton Mifflin Company. All rights reserved Posting to the Accounts Receivable Ledger 1.Post amount to customer’s account in the accounts receivable subsidiary ledger after recording each transaction 2.After posting, place check mark in the sales journal Post. Ref. column next to the customer's name

30 Copyright © Houghton Mifflin Company. All rights reserved Post Sales Journal Transactions to an Accounts Receivable Ledger and a General Ledger

31 Copyright © Houghton Mifflin Company. All rights reserved

32 Copyright © Houghton Mifflin Company. All rights reserved

33 Copyright © Houghton Mifflin Company. All rights reserved Accounts Receivable Ledger: An Example

34 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 4 Prepare a schedule of accounts receivable

35 Copyright © Houghton Mifflin Company. All rights reserved A Schedule of Accounts Receivable

36 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 5 Journalize sales returns and allowances, including credit memorandums and returns involving sales tax, in a general journal, and post to the accounts receivable ledger and general ledger

37 Copyright © Houghton Mifflin Company. All rights reserved Credit Memorandum A written statement indicating a seller’s willingness to reduce the amount of a buyer’s debt Seller records the amount of the credit memorandum in the Sales Returns and Allowances account Buyer records the amount of the credit memorandum in the Purchases Returns and Allowances account

38 Copyright © Houghton Mifflin Company. All rights reserved Credit Memorandum

39 Copyright © Houghton Mifflin Company. All rights reserved Journalize Sales Returns and Allowances in General Journal Journal entry –Credit Accounts Receivable –Debit Sales Returns and Allowances Why a credit memorandum? –Credit is from the seller’s point of view –Seller credits the buyer’s account

40 Copyright © Houghton Mifflin Company. All rights reserved General Journal Entry for Sales Returns and Allowances

41 Copyright © Houghton Mifflin Company. All rights reserved Post Sales Returns and Allowances Post once to: –Sales Returns and Allowances account Post twice to Account Receivable accounts: –Accounts Receivable account in the general ledger Use account number 113 for posting reference –Customer’s individual account in the accounts receivable subsidiary ledger Use √ for posting reference After posting, Post. Ref. column in the general journal shows 113/√

42 Copyright © Houghton Mifflin Company. All rights reserved Post to Sales Returns and Allowances

43 Copyright © Houghton Mifflin Company. All rights reserved Post to Accounts Receivable

44 Copyright © Houghton Mifflin Company. All rights reserved Sales Returns Involving Sales Tax

45 Copyright © Houghton Mifflin Company. All rights reserved Purchase Requisition A form used to request that the Purchasing Department buy something Intended for internal use within a company

46 Copyright © Houghton Mifflin Company. All rights reserved Purchase Requisition

47 Copyright © Houghton Mifflin Company. All rights reserved Purchase Order A written order from the buyer of goods to the supplier, listing the items wanted and the terms of the transaction

48 Copyright © Houghton Mifflin Company. All rights reserved Purchase Order

49 Copyright © Houghton Mifflin Company. All rights reserved Purchase Invoice

50 Copyright © Houghton Mifflin Company. All rights reserved Purchases Journal A special journal used to record the buying of goods on account Used to record the purchase of merchandise only Debits must equal credits on each line

51 Copyright © Houghton Mifflin Company. All rights reserved Purchases Journal The flip side of the sales journal Point of view –The company selling uses the sales journal –The company buying uses the purchase journal –Companies use both!

52 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 6 Journalize transactions in a three- column purchases journal

53 Copyright © Houghton Mifflin Company. All rights reserved Columns in a Three-Column Purchases Journal Date Supplier’s Name Invoice Number Invoice Date Terms Post. Ref. Accounts Payable Credit Freight In Debit Purchases Debit

54 Copyright © Houghton Mifflin Company. All rights reserved Entries in a Three-Column Purchases Journal

55 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 7 Post purchases journal transactions to an accounts payable ledger and a general ledger

56 Copyright © Houghton Mifflin Company. All rights reserved Some Definitions Accounts payable ledger –A subsidiary ledger that lists the individual accounts of creditors in either alphabetical or numerical order Accounts Payable –A controlling account in the general ledger –Account to which the accounts payable total from the purchases journal is posted at the end of the period

57 Copyright © Houghton Mifflin Company. All rights reserved Posting Transactions to the General Ledger at the End of the Period Draw a single line below the last amounts in the period Draw double lines below period’s ending date and totals Crossfoot –Does Accounts Payable column equal sum of all debits? –Use horizontal and vertical addition to prove DR = CR Post all totals to general ledger After posting, place account numbers in parentheses below column totals in purchases journal P in the Post. Ref. column of the ledger account designates the purchases journal

58 Copyright © Houghton Mifflin Company. All rights reserved Posting Transactions to the Accounts Payable Ledger Post amount to supplier’s account each time you record a business transaction After posting, place check mark in the purchases journal Post. Ref. column P in the Post. Ref. column of the ledger account designates the purchases journal

59 Copyright © Houghton Mifflin Company. All rights reserved Post Transactions from a Purchases Journal: An Example

60 Copyright © Houghton Mifflin Company. All rights reserved Post Transactions to an Accounts Payable Ledger: An Example

61 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 8 Prepare a schedule of accounts payable

62 Copyright © Houghton Mifflin Company. All rights reserved Prepare a Schedule of Accounts Payable

63 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 9 Journalize transactions involving purchases returns and allowances in a general journal, and post to the accounts payable ledger and general ledger

64 Copyright © Houghton Mifflin Company. All rights reserved Purchases Returns and Allowances Journalize transactions involving purchases returns and allowances in the general journal Post to: –Accounts payable subsidiary ledger –Accounts Payable general ledger account

65 Copyright © Houghton Mifflin Company. All rights reserved Journalize and Post a Purchase Return

66 Copyright © Houghton Mifflin Company. All rights reserved Journalize and Post a Purchase Return

67 Copyright © Houghton Mifflin Company. All rights reserved Performance Objective 10 Describe the procedures for handling freight charges on merchandise and other goods

68 Copyright © Houghton Mifflin Company. All rights reserved Accounts Used to Record Freight Charges on Merchandise and Other Goods Debit Freight In for transportation charges on incoming merchandise intended for resale Debit Delivery Expense for transportation charges on merchandise sold and being delivered to customers Debit asset accounts for freight costs that apply to assets purchased –For example, $300 freight on a large freezer for a restaurant would be debited to that freezer account –Part of the cost of that asset

69 Copyright © Houghton Mifflin Company. All rights reserved FOB Destination Shipping terms under which the seller pays the freight charges and includes them in the selling price Title or ownership changes hands when the buyer receives the goods

70 Copyright © Houghton Mifflin Company. All rights reserved FOB Shipping Point Shipping terms under which the buyer pays the freight charges between the point of shipment and the destination Payment may be made directly to the carrier upon receiving the goods or to the supplier if the supplier prepaid the freight charge on behalf of the buyer Title or ownership changes hands when goods are transferred to the freight company

71 Copyright © Houghton Mifflin Company. All rights reserved Internal Control Plans and procedures built into the accounting system with the following objectives: –To protect assets against fraud and waste –To provide accurate accounting data –To promote an efficient operation –To encourage adherence to management policies

72 Copyright © Houghton Mifflin Company. All rights reserved Demonstration Problem Journalize and post one transaction in the sales journal Look at a schedule of accounts receivable

73 Copyright © Houghton Mifflin Company. All rights reserved Transaction on One Line

74 Copyright © Houghton Mifflin Company. All rights reserved Post to Subsidiary Ledger

75 Copyright © Houghton Mifflin Company. All rights reserved Place Post. Ref. in Journal!

76 Copyright © Houghton Mifflin Company. All rights reserved Total at End of Period and Post Totals Post

77 Copyright © Houghton Mifflin Company. All rights reserved Post Accounts Receivable

78 Copyright © Houghton Mifflin Company. All rights reserved Post. Ref. = 114 ( ) Post

79 Copyright © Houghton Mifflin Company. All rights reserved Post Sales Tax Payable

80 Copyright © Houghton Mifflin Company. All rights reserved Post. Ref. = 213 ( ) Post

81 Copyright © Houghton Mifflin Company. All rights reserved Post Sales

82 Copyright © Houghton Mifflin Company. All rights reserved Post. Ref. = 411 ( ) ( ) ( )

83 Copyright © Houghton Mifflin Company. All rights reserved Prove DR = CR ( ) ( ) ( )

84 Copyright © Houghton Mifflin Company. All rights reserved At the End of the Period, Track What Customers Owe You


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