1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 9-2 Journalizing Cash Payments Using a Cash Payments Journal

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH PAYMENTS JOURNAL A special journal used to record only cash payment transactions is called a cash payments journal. Since all cash payment transactions affect the cash account, a special amount column is provided for this general ledger account. A journal amount column that is not headed with an account title is called a general amount column. The source document for most cash payments is the check issued. 2 LESSON 9-2 page 242

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH PAYMENTS JOURNAL The total amount shown on a purchase invoice is what a customer is expected to pay To encourage early payment, vendors may allow a deduction from the invoice amount A cash discount is a deduction that a vendor allows on the invoice amount A cash discount on purchases taken by a customer is called a purchases discount This allows the customer to pay less than the invoice amount previously recorded in the purchases account. Reduces the customer’s cost of merchandise purchased. 3 LESSON 9-2

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 9-2 CASH PAYMENT OF AN EXPENSE page 243 November 2. Paid cash for advertising, $150.00. Check No. 292. 1.Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 12345

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 9-2 BUYING SUPPLIES FOR CASH page 243 November 5. Paid cash for office supplies, $94.00. Check No. 293. 1.Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 12345

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH PAYMENTS FOR PURCHASES Businesses usually purchase merchandise on account, however vendors may not extend credit to all customers. Some businesses must pay the vendor with a check before the merchandise will be shipped/delivered. 6 LESSON 9-2

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 9-2 CASH PAYMENTS FOR PURCHASES page 244 November 7. Purchased merchandise for cash, $600.00. Check No. 301. 1.Write the date. 2.Write the account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 1 2 345

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Trade Discounts The retail prices listed for an item is called the list price A reduction in the list price granted to customers is called a trade discount Used to quote different prices for different quantities purchased without changing the list price When a trade discount is granted, the seller’s invoice shows actual amount charged. Trade discounts are not recorded Referred to as the invoice amount 1.Total List Price x Trade Discount Rate = Trade Discount 2.Total List Price – Trade Discount = Invoice Amount 8 LESSON 9-2

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Cash Purchases A cash discount is a percentage deducted from the invoice amount. 2/10, n/30 = two ten -2% may be deducted if paid within 10 days of the invoice date, net thirty –total invoice must be paid within 30 days Purchases discounts are recorded in a general ledger account titled Purchases Discount A contra account is an account that reduces a related amount on a financial statement Purchases Discount is a contra account to Purchases Contra account balances are opposite the balances or their related accounts Cash discounts are recorded as purchases discounts because they decrease the recorded invoice amount 9 LESSON 9-2

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Cash Purchases 1.Purchase Invoice Amount x Purchases Discount Rate = Purchases Discount 2.Purchase Invoice Amount – Purchases Discount = Cash Amount after Discount 10 LESSON 9-2

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 9-2 CASH PAYMENTS ON ACCOUNT WITH PURCHASES DISCOUNTS page 245 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. 1.Write the date. 2.Write the account title of the vendor. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 12 3 4 6.Write the credit amount. 65

12. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning CASH PAYMENTS ON ACCOUNT WITHOUT PURCHASES DISCOUNTS Some vendors do not offer discounts Some businesses do not have the cash available to take advantage of the purchases discount. In both cases, the full invoice amount must be paid. 12 LESSON 9-2

13. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 13 LESSON 9-2 CASH PAYMENTS ON ACCOUNT WITHOUT PURCHASES DISCOUNTS page 246 November 13. Paid cash on account to American Paint, $2,650.00, covering Purchase Invoice No. 77. Check No. 303. 1.Write the date. 2.Write the vendor account title. 3.Write the check number. 4.Write the debit amount. 5.Write the credit amount. 12 3 45

14. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 14 LESSON 9-2 TERMS REVIEW cash payments journal cash discount purchases discount general amount column list price trade discount contra account page 247

15. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Work Together 9-2 page 247 15 LESSON 9-2 Journalizing cash payments using a cash payments journal 1.Using the current year, journalize these transactions on page 10 of a cash payments journal. The checks used as source documents are are abbreviated as C. Transactions: Oct. 1. Paid cash for telephone bill, $85.00. C321 7. Paid cash for office supplies, $52.00. C322 11. Paid cash to GMT Hardware for merchandise with a list price of $800.00, less a 60% trade discount. C323 17. Paid cash on account to West Supply covering Purchase Invoice No. 199 for $3,420.00 less 2% discount. C324 19. Paid cash on account to Quill Forest Products covering Purchase Invoice No. 182 for $4,380.00. C325 (see next slide)

16. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Journalizing Cash Payments example 16 LESSON 9-2 10 Oct. 1Utilities Expense 32185.00 7 Supplies - Office 32252.00 11 Purchases 323320.00 17 West Supply 324 3420.00 3351.60 68. 40 19 Quill Forest Products 3254380.00

17. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning ON YOUR OWN 9-2 page 247 17 LESSON 9-2 Journalizing cash payments using a cash payments journal Complete this activity written on journal provided. Turn in when done. 1.Using the current year, journalize these transactions on page 11 of a cash payments journal. The checks used as source documents are are abbreviated as C. Transactions: Nov. 2. Paid cash for electric bill, $248.00. C432 7. Paid cash for office supplies, $142.00. C433 9. Paid cash to Zebra Metals for merchandise with a list price of $3,400.00, less a 40% trade discount. C434 12. Paid cash on account to Racing Images covering Purchase Invoice No. 543 for $4,230.00 less 2% discount. C435 19. Paid cash on account to SPL Renovations covering Purchase Invoice No. 182 for $2,573.00. C325

18. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning AUDIT YOUR UNDERSTANDING 18 LESSON 9-2 Answer the following questions using Word. Turn in when done. 1.Why would a vendor offer a cash discount to a customer? 2.What is recorded in the general amount columns of the cash payments journal? 3.What is the difference between purchasing merchandise and buying supplies? 4.What is mean by terms of sale 2/10, n/30 ?

19. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning APPLICATION PROBLEM 9-2 19 LESSON 9-2 Complete Application Problem 9-2 (page 260) using the aplia online working papers