1. Special Journals: Purchases and Cash Payments
Chapter 10 2

2. Calculating net purchases.
Learning Objective 1
Calculating net purchases.

3. Learning Unit 10-1 (Buyer’s View of a Merchandise Company)
Purchases = Amount of units
purchased times the cost of each unit
It is the amount that is debited
to the purchases account in
the purchases journal entry.
Normal balance is a debit.

4. Learning Unit 10-1 (Buyer’s View of a Merchandise Company)
Accounts Affected Category Rules
Purchases Cost Dr. 4,000
Accounts Payable, Liability Cr. 4,000
Mattel
July 6
Purchases ,000
Accounts Payable, Mattel ,000
To record purchases on account

5. Learning Unit 10-1 (Buyer’s View of a Merchandise Company)
Purchases Returns and Allowances account
Debit memo is issued for returned, damaged,
or defective purchased merchandise.
Normal balance is a credit. 5

6. Learning Unit 10-1 (Buyer’s View of a Merchandise Company)
Accounts Affected Category Rules
Accounts Payable Liability Dr. 500
Purchases Returns Contra- Cr. 500
and Allowances Cost
July 9
Accounts Payable, Mattel
Purchases Returns and Allowances
Received debit memorandum

7. Learning Unit 10-1 (Buyer’s View of a Merchandise Company)
Purchases discount = A percent decrease
in the amount paid to a supplier
All payments should be timely
to take advantage of this discount.
Purchases $4,000
– Purchases Returns and Allowances
– Purchases Discounts
= Net Purchases $3,430 6

8. Learning Unit 10-1 (Buyer’s View of a Merchandise Company)
F.O.B. destination:
The seller is responsible for freight.
F.O.B. shipping point:
The buyer is responsible for freight.

9. Journalizing transactions
Learning Objective 2
Journalizing transactions
in a purchases journal.

10. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
Verifying Numbers
Receiving Goods
Purchase Invoice
Purchase Order
Purchase
Requisition

11. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
Sales invoice for
the seller =
Purchase invoice
for the buyer
Purchases Journal
Accounts Payable Subsidiary Ledger

12. Posting from a purchases journal to the accounts payable subsidiary
Learning Objective 3
Posting from a purchases journal
to the accounts payable subsidiary
ledger and the general ledger.

13. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
Purchases are posted in total to
the Purchases account and the
Accounts Payable account.
They are also recorded as credits
to individual creditors in the
Accounts Payable account.

14. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
Purchases Journal
Accounts
Date Account Payable Purchases
200x Credited Terms Credit Debit
April 3 XYZ Co. 2/10, n/ , ,000

15. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
Special Journals
Purchases Journal
Purchases of inventory for resale on account
Cash Payments Journal
All payments of cash (cash disbursements journal)

16. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
Purchase transaction amounts are
posted to each supplier in the
purchases journal and accounts
payable subsidiary ledgers.
The purchases journal records
all purchases on account
(credit purchases only).

17. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
Each credit purchase transaction
is posted to each accounts
payable supplier as a credit.
The totals of the Accounts Payable,
and Purchases columns are posted to
each of these general ledger accounts.
Cash discount terms are listed.

18. Preparing, journalizing,
Learning Objective 4
Preparing, journalizing,
recording, and posting
a debit memorandum.

19. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
What is a debit memorandum?
It is a record of purchases returns and
allowances showing amounts that were
deducted from the balance owed to creditors.
It relates to a contra-expense account
with a normal credit balance.

20. Learning Unit 10-2 (Steps Taken in Purchasing Merchandise)
A debit memorandum for $200 was issued.
Accounts Affected Category Rules
Accounts Payable Liability Dr. 200
Purchases Returns Contra- Cr. 200
and Allowances Cost
April 9
Accounts Payable, Thorpe Company 200
Purchases Returns and Allowances
Debit memo #1

21. Journalizing and posting from a cash payments journal.
Learning Objective 5
Journalizing and posting
from a cash payments journal.

22. Learning Unit 10-3 (The Cash Payments Journal)
The cash payments journal records
all payments made in cash.
Accounts Payable, Purchases Discount,
and Cash column totals are
posted to the general ledger.
Sundry is a miscellaneous accounts
column that provides flexibility
for reporting transactions.

23. Learning Unit 10-3 (The Cash Payments Journal)
Debit Columns = Credit Columns
Sundry + Accounts Payable = Purchases Discount + Cash
$2,400 + $4,600
$6 + $6,994 =
$7,000 =

24. Learning Objective 6
Preparing a schedule
of accounts payable.

25. Learning Unit 10-3 (The Cash Payments Journal)
Accounts Payable is the controlling
account in the general ledger.
At the end of the month, the total owed in
Accounts Payable should equal the sum
owed to the individual creditors that are
listed on the schedule of accounts payable.

26. End of Chapter 10