Presentation on theme: "Chapter 8 Accounting for Purchases and Accounts Payable"— Presentation transcript:
1 Chapter 8 Accounting for Purchases and Accounts Payable
2 Source Documents Purchases Requisition Purchase Order Lists items neededInternal documentPurchase OrderExternalSent to Supplier
3 Source Documents Purchases Requisition Purchase Order Lists items neededInternal documentPurchase OrderExternalSent to Supplier
4 Source Documents Receiving Report Invoice Shows items received From supplier showing what was shippedCompared with the receiving report
5 Purchases Journal Used for merchandise purchased on credit More efficient than General JournalFewer postings to general ledgerSpeed up recording time for transactionsPurchase Journal Format (3-Column)Accounts Payable - CreditPurchases - DebitFreight-in Debit
6 Posting ProcessEach transaction is posted to a supplier account at the time of the transaction.Posted to the credit side on the accountSummary postings are made monthly.Account Payable - CreditPurchases - DebitFreight-in - Debit
7 Pop Quiz #1 - True or False? A purchase requisition states what the buyer wishes to purchase.The invoice is the bill that comes after goods are shipped or received.True
8 Pop Quiz #1- True or False? Freight-In is a selling expense for the business that purchases the item shipped.A purchases journal is used to record all purchases that a business makes.Purchases is a balance sheet account.False
9 Accounts Payable Ledger Subsidiary Ledger - Separate/Subordinate to General LedgerLists the name of all creditors (suppliers)Balances are presumed to be credit balancesCircled balances can be used to indicate debitPostings to this ledger are made daily fromPurchases JournalGeneral Journal
10 Purchases Returns & Allowances Contra expense accountNormal credit balanceControl Account - PurchasesReturns:Merchandise returned for creditAllowances:Price reduction for inferior merchandise
11 General Journal EntryWhen a company returns or receives an allowance for merchandise the following entry is made:Accounts Payable / Supplier xxPurchases Ret. & Allow xxCredit Memo #xxThree postings are required for this entry.
12 Schedule of Accounts Payable Lists amounts (balances) owed to creditors.Suppliers are listed in alphabetical order.Total is compared to the balance in Accounts Payable in the General Ledger.Accounts Payable (General Ledger) is the control account and is the link between the two ledgers.
13 Cost of Purchases Purchases Freight In Purchases Returns & Allowances = Delivered Cost of Purchases
14 Calculating Purchases. . . A truckload of 20 washing machines were purchased at a cost of $100 per machine. The cost of the freight to deliver these machines was $100. One of the washing machines was returned to the supplier because it was defective.What is the cost of this purchase?
15 Pop Quiz #2 - True or False? A purchases discount is given to encourage prompt payment.Good internal control of purchasing means giving salespeople the authority to order merchandise.
16 Pop Quiz #2 - True or False? The total from the purchases journal on accounts payable is posted to inventory.Freight In must be added to purchase cost to determine true cost of purchases.FalseTrue