CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1-2 Journalizing and Posting Purchases and Purchases Returns

CENTURY 21 ACCOUNTING © Thomson/South-Western DEPARTMENTAL ACCOUNTING SYSTEM Merchandising Business – a business that purchases and sells goods Departmental Accounting System – an accounting system showing accounting information for two or more departments Departmental accounting information can help management decide whether a department’s performance is acceptable or not. Departmental Purchases on account – recorded in purchases journal. Differences in departmental accounting: Each purchase invoice has a notation placed on it showing to which department the purchase applies Each department has a separate Purchases debit column in the purchases journal 2 LESSON 1-2

CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 1-2 June 1. Purchased video equipment on account from Western Digital Systems, $ Purchase Invoice No JOURNALIZING PURCHASES ON ACCOUNT 1.Write approval date. 4.Write invoice amount. 3.Record invoice number. 2.Write vendor name. page Departments

CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON Write the date. 5.Write vendor number. 4.Calculate new account balance. 3.Record the credit amount. 2.Write journal page number. POSTING FROM A PURCHASES JOURNAL page

CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON Calculate new account balance. 3.Write column total. 2.Write journal page number. POSTING THE TOTALS OF A PURCHASES JOURNAL page 15 1.Write the date. 5.Write account number

CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 9-4 DEBIT MEMORANDUM FOR PURCHASES RETURNS AND ALLOWANCES page 256  Customers may not want to keep merchandise that is inferior in quality or is damaged when received.  Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer’s accounts payable, is called a purchases return  When merchandise is damaged but still usable or is of different quality than that ordered, the vendor may let the customer keep the merchandise at a reduced price  Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer’s accounts payable, is called a purchases discount

CENTURY 21 ACCOUNTING © Thomson/South-Western PURCHASE RETURNS & ALLOWANCES 7 LESSON 1-2  When merchandise is returned to a vendor, the vendor’s account & Accounts Payable are reduced by a debit  Debit Memorandum – a form prepared by the customer showing the price deduction for purchase returns & allowances  Contra Account – an account that reduces a related account on a financial statement  Purchases discount is a contra cost account  It is part of the Cost of Goods Sold section of the income statement

CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON Enter accounts to be debited. 3.Record debit memo number. JOURNALIZING PURCHASES RETURNS AND ALLOWANCES page Write the date. 4.Draw diagonal line. 5.Write debit amount. 7.Write credit amount. 6.Enter account to be credited.

CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 1-2 TERMS REVIEW departmental accounting system merchandising business posting debit memorandum contra account page 17