1. © 2014 Cengage Learning. All Rights Reserved. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO1 Explain the purpose of a general journal. LO2 Account for purchases returns and allowances. LO3 Post a general journal to the accounts payable ledger and general ledger.

2. © 2014 Cengage Learning. All Rights Reserved. Do Now ●Name the main purpose of each of the special journals listed below: ●Purchases Journal ●Cash Payments Journal ●Sales Journal ●Cash Receipts Journal ●What journal do we have left to discuss? SLIDE 2

3. © 2014 Cengage Learning. All Rights Reserved. General Journal ●A journal with two amount columns in which all kinds of entries can be recorded is called a general journal. ●Not every transaction can be recorded in a special journal. ●Think & Ink: Give an example of a transaction to be recorded in the general journal ●Example: buying store supplies on account ●Transaction not in CPJ, not merchandise SLIDE 3 Lesson 11-1 LO1

4. © 2014 Cengage Learning. All Rights Reserved. Memorandum for Buying Supplies on Account SLIDE 4 LO1 Lesson 11-1

5. © 2014 Cengage Learning. All Rights Reserved. Buying Supplies on Account SLIDE 5 December 2. Bought store supplies on account from Estes Supply, $165.25. Memorandum No. 42. LO1 Lesson 11-1 Supplies—Store 165.25 Accounts Payable 165.25 3 3 Memorandum Number 1 1 Date 5 5 Account Title and Vendor Name 4 4 Debit Amount 2 2 Account Title 6 6 Diagonal Line 7 7 Credit Amount

6. © 2014 Cengage Learning. All Rights Reserved. Buying Supplies on Account ●Equality of debits and credits checked after each general journal entry is recorded ●General journal entry posted to a controlling account, such as Accounts Payable, is also posted to subsidiary ledger account ●Maintains equality of controlling account balances with sum of subsidiary ledger account balances SLIDE 6

7. © 2014 Cengage Learning. All Rights Reserved. Pair & Share ●Under what circumstances would you return merchandise bought to a business? ●What is this called? ●Under what circumstances would you require a decrease in the amount you owe, but you keep the merchandise bought? ●What is this called? SLIDE 7

8. © 2014 Cengage Learning. All Rights Reserved. Debit Memorandum for Purchases Returns and Allowances ●Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer’s account payable to the vendor, is called a purchases return. ●Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer’s account payable to the vendor, is called a purchases allowance. ●A form prepared by the customer showing the price deduction taken by the customer for a return or an allowance is called a debit memorandum. SLIDE 8 LO2 Lesson 11-1

9. © 2014 Cengage Learning. All Rights Reserved. Debit Memorandum for Purchases Returns and Allowances ●Debit memorandums used as source documents for purchases returns and allowances transaction ●Objective Evidence Accounting Concept ●Purchase Returns and Allowances is separate account used to record amounts credited ●Used to evaluate efficiency of purchasing activities ●Contra account to Purchases, so it has a normal credit balance ●Both accounts listed in Cost of Goods Sold division of chart of accounts SLIDE 9 LO2 Lesson 11-1

10. © 2014 Cengage Learning. All Rights Reserved. Debit Memorandum for Purchases Returns and Allowances SLIDE 10 LO2 Lesson 11-1

11. © 2014 Cengage Learning. All Rights Reserved. Journalizing Purchases Returns and Allowances SLIDE 11 LO2 Lesson 11-1 December 8. Returned merchandise to Mobley Tools, $43.90, covering Purchase Invoice No. 528. Debit Memorandum No. 38. Accounts Payable 43.90 Purchases Returns and Allowances 43.90 3 3 Debit Memorandum Number 1 1 Date 6 6 Account Title 5 5 Debit Amount 2 2 Account Title and Vendor Name 4 4 Diagonal Line 7 7 Credit Amount

12. © 2014 Cengage Learning. All Rights Reserved. Scenarios ●Create and act out a skit depicting either a purchase return or purchase allowance ●Then make the proper journal entry on your white board based on the scenario depicted in the skit SLIDE 12

13. © 2014 Cengage Learning. All Rights Reserved. Posting from General Journal to Accounts Payable Ledger ●Why is there a dashed line in the Post. Ref. Column in the previous transaction? ●Diagonal line in Post. Ref. column allows posting references of both general ledger and subsidiary ledger accounts to be recorded ●At end of each day, each line of entry posted in sequence to general ledger and any subsidiary ledger SLIDE 13

14. © 2014 Cengage Learning. All Rights Reserved. Give it a Try… ●With a partner, complete Work Together 11-1, with the exception of the posting section ●When finished, begin the first transaction on the overhead for On-Your-Own 11-1 SLIDE 14

15. © 2014 Cengage Learning. All Rights Reserved. Posting from a General Journal to an Accounts Payable Ledger SLIDE 15 LO3 Lesson 11-1 3 3 Debit or Credit Amounts 5 5 Vendor Number 4 4 Account Balance 2 2 Journal Page Number 5 5 1 1 2 2 3 3 4 4 1 1 Date

16. © 2014 Cengage Learning. All Rights Reserved. Posting from a General Journal to a General Ledger SLIDE 16 LO3 Lesson 11-1 3 3 Debit or Credit Amounts 1 1 Date 5 5 Vendor Number 4 4 Account Balance 2 2 Journal Page Number 5 5 1 1 2 2 3 3 4 4

17. © 2014 Cengage Learning. All Rights Reserved. Give it another Try… ●With a partner, complete the posting section of Work Together 11-1 ●When finished, begin the first part of posting for On-You-Own 11-1 SLIDE 17

18. © 2014 Cengage Learning. All Rights Reserved. Lesson 11-1 Audit Your Understanding 1.When is a transaction recorded in a general journal? SLIDE 18 ANSWER When the transaction cannot be recorded in special journal Lesson 11-1

19. © 2014 Cengage Learning. All Rights Reserved. Lesson 11-1 Audit Your Understanding 2.When is the equality of debits and credits proved for a general journal? SLIDE 19 ANSWER After each general journal entry is recorded Lesson 11-1

20. © 2014 Cengage Learning. All Rights Reserved. Lesson 11-1 Audit Your Understanding 3.What is a primary difference between a purchases return and a purchases allowance? SLIDE 20 ANSWER A purchases return is credit allowed for the purchase price of returned merchandise. A purchases allowance is credit allowed for part of the purchase price of merchandise that is not returned, such as for units that are damaged but still usable or of a different quality than that ordered. Lesson 11-1

21. © 2014 Cengage Learning. All Rights Reserved. Lesson 11-1 Audit Your Understanding 4.If purchases returns and allowances decrease the value of Purchases,, why are returns and allowances credited to a separate account? SLIDE 21 ANSWER Better information is provided if purchases returns and allowances are credited to a separate account. A business can then track the amount of purchases returns and allowances in a fiscal period to evaluate the efficiency of its purchasing activities. Lesson 11-1