1. Unit 4 The Accounting Cycle for a Merchandising Corporation
Chapter 14 Accounting for Sales and Cash Receipts
Chapter 15 Accounting for Purchases and Cash Payments
Chapter 16 Special Journals: Sales and Cash Receipts
Chapter 17 Special Journals: Purchases and Cash Payments
Chapter 18 Adjustments and the Ten-Column Work Sheet
Chapter 19 Financial Statements for a Corporation
Chapter 20 Completing the Accounting Cycle for a Merchandising Corporation
Chapter 21 Accounting for Publicly Held Corporations
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter 17 Special Journals: Purchases and Cash Payments
What You’ll Learn
Explain the purpose of the purchases and cash payments journals.
Record transactions in the purchases and cash payments journal.
Record payroll transactions in the cash payment journal.
Post from the purchases and cash payments journals to the general ledger and the accounts payable subsidiary ledger.
Total, prove, and rule the purchases and cash payments journals.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

3. Chapter 17 Special Journals: Purchases and Cash Payments
What You’ll Learn
Prepare a schedule of accounts payable.
Prove cash.
Define the accounting terms introduced in this chapter.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

4. Chapter 17, Section 1 The Purchases Journal
What Do You Think?
What other phrase could be used instead of “credit purchases”?
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

5. The Purchases Journal Main Idea You Will Learn
SECTION 17.1
Main Idea
The purchases journal is used to record credit purchases.
You Will Learn
how to use the purchases journal.
how to post transactions from the purchases journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

6. The Purchases Journal Key Terms purchases journal SECTION 17.1
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

7. The Purchases Journal Using the Purchases Journal
SECTION 17.1
Using the Purchases Journal
The purchases journal is a special journal used to record all purchases on account. In this chapter, you will learn how accountants use purchases and cash payments journals to record the purchase of merchandise and other assets.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

8. The Purchases Journal Recording the Purchase of Merchandise on Account
SECTION 17.1
Recording the Purchase of Merchandise on Account
After verifying an invoice, record the purchase in the purchases journal:
Enter the date in the Date column.
Enter the invoice number in the Invoice Number column.
Enter the creditor’s name in the Creditor’s Account Credited column.
Enter the total of the invoice in the Accounts Payable Credit column.
Enter the total amount of the invoice in the Purchases Debit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

9. The Purchases Journal Journalizing Other Purchases on Account
SECTION 17.1
Journalizing Other Purchases on Account
Purchases that do not occur often are recorded in the General Debit column of the purchases journal by following these steps:
Enter the date the invoice was received in the Date column.
Enter the invoice number in the Invoice Number column.
Enter the creditor’s name in the Creditor’s Account Credited column.
Enter the total of the invoice in the Accounts Payable Credit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

10. The Purchases Journal Journalizing Other Purchases on Account
SECTION 17.1
Journalizing Other Purchases on Account
Enter the name of the general ledger account in the General Account Debited column.
Enter the total amount of the invoice in the General Debit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

11. The Purchases Journal Posting from the Purchases Journal
SECTION 17.1
Posting from the Purchases Journal
Special journals save time in recording and posting business transactions. To post to the accounts payable subsidiary ledger:
Enter the transaction date in the Date column of the subsidiary ledger account.
Enter the journal letter and number in the Posting Reference column.
Enter the amount owed to the creditor in the Credit column of the subsidiary ledger account.
Compute the new account balance by adding the amount in the Credit column to the previous balance amount.
Return to the purchases journal and place a check mark in the first Posting Reference column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

12. The Purchases Journal Posting from the Purchases Journal SECTION 17.1
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

13. The Purchases Journal Posting from the General Debit Column
SECTION 17.1
Posting from the General Debit Column
To post from the General Debit column of the purchases journal, follow these steps:
Enter the transaction date in the general ledger account Date column.
Record the journal letter and page number in the Posting Reference column.
Enter the amount recorded in the General Debit column of the purchases journal in the general ledger Debit column.
Compute and record the new balance in the Debit Balance column.
Place the general ledger account number in the General Posting Reference column of the purchases journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

14. The Purchases Journal
SECTION 17.1
Totaling, Proving, and Ruling the Purchases Journal
Complete the purchases journal by following these steps:
Draw a single rule across the three amount columns.
Foot each column.
Test for debit and credit equality.
Enter the date the journal is being totaled in the Date column just below the single rule.
On the same line, write Totals in the Creditor’s Account Credited column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

15. The Purchases Journal
SECTION 17.1
Totaling, Proving, and Ruling the Purchases Journal
Enter the three column totals in ink, below the footings.
Draw a double rule across the three amount columns.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

16. The Purchases Journal
SECTION 17.1
Totaling, Proving, and Ruling the Purchases Journal
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

17. The Purchases Journal
SECTION 17.1
Posting the Special Column Totals to the General Ledger
After the purchases journal is totaled and ruled, the totals of the Accounts Payable Credit column and the Purchases Debit column are posted to the general ledger accounts, and the new balance is calculated and entered in the Balance column. Each account number is written in parentheses below the double rule in the purchases journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

18. The Purchases Journal
SECTION 17.1
Posting the Special Column Totals to the General Ledger
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

19. The Purchases Journal Key Terms Review purchases journal
SECTION 17.1
Key Terms Review
purchases journal
A special journal used to record all transactions in which items are bought on account.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

20. Chapter 17, Section 2 The Cash Payments Journal
What Do You Think?
Why is it important to keep track of cash paid out?
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

21. The Cash Payments Journal
SECTION 17.2
Main Idea
The cash payments journal is used to record the cash a business pays out.
You Will Learn
how to record cash payment transactions.
how to post from the cash payments journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

22. The Cash Payments Journal
SECTION 17.2
Key Terms
cash payments journal
schedule of accounts payable
proving cash
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

23. The Cash Payments Journal
SECTION 17.2
Using the Cash Payments Journal
The cash payments journal is used to record all transactions in which cash is paid out. These transactions include
payments to creditors for items bought on account,
payments for various expenses,
payments for wages and salaries, and
cash decreases for bank service charges and bankcard fees.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

24. The Cash Payments Journal
SECTION 17.2
Using the Cash Payments Journal
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

25. The Cash Payments Journal
SECTION 17.2
Recording the Cash Purchase of an Asset
A transaction involving a cash purchase is recorded using the following steps:
Enter the transaction date in the Date column.
Enter the check number in the Document Number column.
Enter the name of the account debited in the Account Name column.
Enter the debit amount in the General Debit column.
Enter the credit amount in the Cash in Bank Credit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

26. The Cash Payments Journal
SECTION 17.2
Recording a Cash Purchase of Merchandise
Record merchandise purchases for resale by following these steps:
Enter the transaction date in the Date column.
Enter the check number in the Document Number column.
Enter the name of the account debited in the Account Name column.
Enter the Purchases amount in the General Debit column.
Enter the check amount in the Cash in Bank Credit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

27. The Cash Payments Journal
SECTION 17.2
Recording a Cash Purchase of Merchandise
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

28. The Cash Payments Journal
SECTION 17.2
Recording a Payment on Account
Follow these steps to record a payment on account and purchase discount:
Enter the transaction date in the Date column.
Enter the check number in the Document Number column.
Enter the creditor’s name in the Account Name column.
Enter the original purchase amount in the Accounts Payable Debit column.
Enter the purchase discount amount in the Purchases Discounts Credit column.
Enter the check amount in the Cash in Bank Credit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

29. The Cash Payments Journal
SECTION 17.2
Recording a Payment on Account
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

30. The Cash Payments Journal
SECTION 17.2
Recording Other Cash Payments
To record a check written to pay for shipping charges when merchandise is sent FOB shipping point, follow these steps:
Enter the transaction date in the Date column.
Enter the check number in the Document Number column.
Enter the name of the account debited in the Account Name column.
Enter Transportation In amount in the General Debit column.
Enter the check amount in the Cash in Bank Credit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

31. The Cash Payments Journal
SECTION 17.2
Recording Other Cash Payments
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

32. The Cash Payments Journal
SECTION 17.2
Recording Payment of Payroll
To record the payroll transaction, follow these steps:
Enter the transaction date in the Date column.
Enter the check number in the Document Number column.
Enter the name of the account debited in the Account Name column.
Enter the payroll amount in the General Debit column.
Enter the net pay in the Cash in Bank Credit column.
Enter the names of the accounts credited in the Account Name column and the amount of each liability in the General Credit column.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

33. The Cash Payments Journal
SECTION 17.2
Recording Payment of Payroll
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

34. The Cash Payments Journal
SECTION 17.2
Recording Bank Service Charges
Bank service charges are automatically deducted from the checking account. The charges decrease the Cash in Bank account.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

35. The Cash Payments Journal
SECTION 17.2
Recording Bankcard Fees
Bankcard fees are automatically deducted from the business’s checking account. This transaction is recorded as a decrease in cash in the cash payments journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

36. The Cash Payments Journal
SECTION 17.2
Posting from the Cash Payments Journal
To post from the Cash Payments Journal, follow these steps:
Enter the transaction date in the Date column of the subsidiary ledger account.
Enter the journal letters and page number in the Posting Reference column.
Enter the Accounts Payable Debit amount from the journal in the Debit column of the subsidiary ledger account.
Compute and enter the new balance in the Balance column. Draw a line through the Balance column if the account has a zero balance.
Enter a check mark in the Posting Reference column in the cash payments journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

37. The Cash Payments Journal
SECTION 17.2
Posting from the General Debit Column
To post from the General Debit column, follow these steps:
Enter the transaction date in the Date column of the general ledger.
Enter the journal letters and page number in the Posting Reference column.
In the Debit column, enter the amount from the General Debit column of the cash payments journal.
Compute and enter the new balance in the appropriate Balance column.
Enter the account number in the Posting Reference column of the cash payments journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

38. The Cash Payments Journal
SECTION 17.2
Totaling, Proving, and Ruling the Cash Payments Journal
The cash payments journal is proven the same way as other special journals.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

39. The Cash Payments Journal
SECTION 17.2
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

40. The Cash Payments Journal
SECTION 17.2
Posting Column Totals to the General Ledger
At the end of the month, column totals from each special account column are posted to Accounts Payable, Purchases Discounts, and Cash in Bank in the general ledger. The totals of the General Debit and Credit columns are not posted.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

41. The Cash Payments Journal
SECTION 17.2
Proving the Accounts Payable Subsidiary Ledger
A schedule of accounts payable is prepared after posting the column totals. The accounts payable subsidiary ledger is proven when the total schedule of accounts payable equals the balance of the Accounts Payable account in the general ledger.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

42. The Cash Payments Journal
SECTION 17.2
Proving the Accounts Payable Subsidiary Ledger
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

43. The Cash Payments Journal
SECTION 17.2
Proving Cash
Proving cash is the process of verifying that cash recorded in the accounting records matches the amount entered in the checkbook. To prove cash, follow these steps:
On the first line, enter the Cash in Bank beginning balance.
On the next line, enter the total cash received during the month.
Add the first and second lines.
Subtract the cash payments for the month.
Compare the result to the balance shown on the last check stub in the checkbook.
If the balances are not equal, look for errors.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

44. The Cash Payments Journal
SECTION 17.2
Key Terms Review
cash payments journal
A special journal used to record all transactions in which cash is paid out or decreased.
schedule of accounts payable
A list of all creditors in the accounts payable ledger, the balance in each account, and the total amount owed to all creditors.
proving cash
The process of verifying that cash recorded in the accounting records agrees with the amount entered in the checkbook.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

45. Chapter 17 Review Question 1
A company has these journals: sales, cash receipts, purchases, cash payments, and general. It also has the following ledgers: accounts receivable subsidiary and accounts payable subsidiary. For each of the following transactions, indicate (a) the correct journal and (b) whether the subsidiary ledger is used.
purchase for cash
purchase on credit
payment of accounts payable
purchase of equipment on credit
cash receipt from customer on account
cash discount taken on accounts payable
issued a check to pay an accounts payable
bank service charges deducted on bank statement
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

46. Chapter 17 Review CHAPTER 17 Answer 1
Purchase for cash: (a) cash payments
Purchase on credit: (a) purchases (b) A/P subsidiary ledger
Payment of accounts payable (a) cash payments (b) A/P subsidiary ledger
Purchase of equipment on credit (a) purchases (b) A/P subsidiary ledger
Cash receipt from customer on account: (a) cash receipts (b) A/R subsidiary ledger
Cash discount taken on accounts payable: (a) cash payments (b) A/P subsidiary ledger
Issued a check to pay an accounts payable (a) cash payments (b) A/P subsidiary ledger
Bank service charges deducted on bank statement: (a) cash payments
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

47. Chapter 17 Review Question 2
Look at the cash payments journal. Several columns contain information on business transactions. Indicate whether you would post only the column total with a (T), post each individual transaction with an (E), or post each to the subsidiary ledger and the column total to the controlling account in the general ledger (B).
General Debit __________
General Credit __________
Accounts Payable Debit __________
Purchases Discount Credit __________
Cash in Bank Credit __________
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

48. Chapter 17 Review Answer 2 General Debit: E General Credit: E
Accounts Payable Debit: B
Purchases Discount Credit: T
Cash in Bank Credit: T
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

49. Chapter 17 Review Question 3
You have a transaction that involves credit. Which journal(s) would you use?
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

50. Chapter 17 Review
CHAPTER 17
Answer 3
If credit is being granted to a customer, you would use the sales journal. If credit is being requested from a vendor, you would use the purchases journal.
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

51. Resources Glencoe Accounting Online Learning Center English Glossary
Spanish Glossary
Glencoe Accounting Unit 4 Chapter 17 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.