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CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 9-1 Journalizing Purchases Using a Purchases Journal Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School
CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 9-1 Merchandising Businesses page 236 A business that purchases and sells goods is called a merchandising business Goods that a business purchases to sell are called merchandise A merchandising business that sells to those who use or consume the goods is called a retail merchandising business A business that buys & resells merchandise in retail merchandising businesses is called a wholesale merchandising business
CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 9-1 Merchandising Businesses page 236 A journal used to record only one kind of transaction is called a special journal Most merchandising businesses use 5 special journals to record daily transactions: Purchases journal – for all purchases of merchandise on account Cash payment journal – for all cash payments Sales journal – for all sales of merchandise on account Cash receipts journal – for all cash receipts General journal – for all other transactions
CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 9-1 PURCHASING MERCHANDISE page 236 The price a business pays for goods it purchases to sell is called cost of merchandise. The amount added to the cost of merchandise to establish the selling price is called markup The account used for recording the cost of merchandise is titled purchases. Purchases is classified as a cost account because it is in the cost of merchandise division in the chart of accounts. Purchases is a temporary account & has a normal debit balance A business from which merchandise is purchased or supplies or other assets are bought is called a vendor
CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 9-1 PURCHASES ON ACCOUNT page 236 The cost account, Purchases, is used only to record the cost of merchandise purchased. A transaction in which the merchandise purchased is to be paid for later is called a purchase on account Businesses that purchase on account from many vendors will have many accounts for vendors. The total amount owed to all vendors can be summarized in a single general ledger account titled Accounts Payable
CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 9-1 PURCHASES JOURNAL page 237 A special journal used to record only purchases of merchandise on account is called a purchases journal A purchase on account transaction is recorded on only one line of the purchases journal A journal amount column headed with an account title is called a special amount column Using special amount columns eliminates writing general ledger account titles in the Account Title column and saves time
CENTURY 21 ACCOUNTING © Thomson/South-Western PURCHASE INVOICE 7 LESSON 9-1 When a vendor sells merchandise to a buyer, the vendor prepares a form showing what has been sold. A form describing the goods sold, the quantity, and the price is known as an invoice An invoice used as a source document for recording a purchase on account transaction is called a purchase invoice A purchase invoice lists the quantity, the description, the price of each item, and the total amount of the invoice
CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 9-1 2 1.Stamp the date received and purchase invoice number. PURCHASE INVOICE 1 3 4 page 238 4.Review the vendor’s terms. 3.Initials of the person who checked the invoice. 2.Place a check mark by each amount.
CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 9-1 PURCHASING MERCHANDISE ON ACCOUNT 1 2 34 page 239 November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83. 1.Write the date. 2.Write the vendor name. 3.Write the purchase invoice number. 4.Write the amount of the invoice.
CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 9-1 TOTALING AND RULING A PURCHASES JOURNAL 2 3 45 page 240 1 6 1.Rule a single line across the amount column. 2.Write the date. 3.Write the word Total. 4.Add the amount column. 5.Write the total. 6.Rule double lines across the amount column. Purchases journal is always ruled at the end of each month, even if the page for the month is not full
CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 9-1 TERMS REVIEW merchandise merchandising business retail merchandising business wholesale merchandising business corporation share of stock capital stock stockholder special journal cost of merchandise markup vendor purchase on account purchases journal special amount column purchase invoice terms of sale page 241
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