accounting is fun! 1 chapter 10 & 11 special journals

Accounting Is Fun! 1

Chapter 10 & 11Chapter 10 & 11

Special JournalsSpecial Journals


Chapter 10 & 11Chapter 10 & 11 Performance objectives:Performance objectives:

1.1. New accounts for merchandising businessNew accounts for merchandising business

2.2. InvoicesInvoices

3.3. Cash discounts, credit card expense and notes payableCash discounts, credit card expense and notes payable

4.4. Sales journalSales journal

5.5. Purchase journalPurchase journal

6.6. Schedule of accounts receivableSchedule of accounts receivable

7.7. Schedule of accounts payableSchedule of accounts payable

8.8. Sales returns and allowancesSales returns and allowances

9.9. Purchase returns and allowancesPurchase returns and allowances

10.10. Cash receipts journalCash receipts journal

11.11. Cash payments journalCash payments journal


ReminderReminder

Contra accounts:Contra accounts: Attached to another accountAttached to another account Opposite “+” & “-”Opposite “+” & “-”


Describe The Specific Accounts Used By Describe The Specific Accounts Used By A Merchandising FirmA Merchandising Firm

= + + -

+ - - + - + - + + -DR CR DR CR DR CR DR CR DR CR

+ - - + - + + -DR CR DR CR DR CR DR CR

+ - - +DR CR DR CR

+ - - +DR CR DR CR

+ -DR CR

Freight In

Sales Returnsand Allowances

Purchases Returnsand Allowances

Sales DiscountPurchasesDiscounts

Expenses

MerchandiseInventory

Sales TaxPayable Sales Purchases

Assets Liabilities Owner's Equity Revenues


Accounts Used by Accounts Used by Merchandising FirmMerchandising Firm

Nine new accounts (T accounts on page 330)Nine new accounts (T accounts on page 330) Assets:Assets:

1.1. Merchandising InventoryMerchandising Inventory Stock of goods that company buys & intends to resellStock of goods that company buys & intends to resell Examples:Examples:

Shoes in shoe storeShoes in shoe store Boomerangs and kites in kite storeBoomerangs and kites in kite store

This account shows all the inventory This account shows all the inventory afterafter Purchases Purchases account is closedaccount is closed



Liabilities:Liabilities:

2.2. Sales Tax PayableSales Tax Payable We collect sales tax for the government, and We collect sales tax for the government, and

thus we must record the liability when we thus we must record the liability when we receive the moneyreceive the money We will pay laterWe will pay later



Revenues:Revenues:3.3. Sales accountSales account

Account used to record sales revenue from selling shoes, boomerangs, Account used to record sales revenue from selling shoes, boomerangs, groceries, etc.groceries, etc.

Contra revenues:Contra revenues:4.4. Sales Returns & AllowancesSales Returns & Allowances

From seller’s point of view, account used to record returned From seller’s point of view, account used to record returned merchandise or reductions in revenues because merchandise was merchandise or reductions in revenues because merchandise was damageddamaged

Reduction to revenuesReduction to revenues

5.5. Sales DiscountsSales Discounts From seller’s point of view, account used to record cash discounts From seller’s point of view, account used to record cash discounts

given for prompt payment of “on account” salesgiven for prompt payment of “on account” sales Reduction to revenuesReduction to revenues



Expenses:Expenses:6.6. PurchasesPurchases

Account used to record the cost of merchandise bought for resaleAccount used to record the cost of merchandise bought for resale Only for purchased items you intend to resellOnly for purchased items you intend to resell At closing, we have to count inventory to see if we used all our purchasesAt closing, we have to count inventory to see if we used all our purchases

9.9. Freight In accountFreight In account Account used to record shipping costs for purchasesAccount used to record shipping costs for purchases

Contra expenses:Contra expenses:7.7. Purchases Returns & AllowancesPurchases Returns & Allowances

From purchaser’s point of view, account used to record returned From purchaser’s point of view, account used to record returned merchandise or reductions in expenses because merchandise was damagedmerchandise or reductions in expenses because merchandise was damaged

Reduction to expensesReduction to expenses

8.8. Purchases DiscountsPurchases Discounts From purchaser’s point of view, account used to record cash discounts From purchaser’s point of view, account used to record cash discounts

earned for prompt payment of “on account” purchasesearned for prompt payment of “on account” purchases


InvoicesInvoices Seller issues invoiceSeller issues invoice

Items shippedItems shipped CostCost TermsTerms Mode of shippingMode of shipping

Seller’s point of view:Seller’s point of view: Sales invoiceSales invoice

Increase sales revenueIncrease sales revenue Buyer’s point of view:Buyer’s point of view:

Purchase invoicePurchase invoice Increase purchasesIncrease purchases


Invoice No. 4369

INVOICE

Customer Misc

Name Date 2/23/2003Address Order No.City Watermore State MD ZIP 40025 RepPhone FOB Shipping Point

Qty Unit Price TOTAL15 10.00$ 150.00$ 8 12.50$ 100.00$

SubTotal 250.00$ Shipping

Payment Select One… Tax Rate(s)

Comments TOTAL 250.00$ NameCC #

ExpiresOffice Use Only

Our Customers Have Many Happy Returns!

Gel Boomerangs2124 Kittredge St. PMB 61

Berkeley, CA 94704

Kite Flight1414 43rd Ave.

DescriptionBellensDuece

Terms: 2/10,N/30

Invoice No. 104963

INVOICE

Customer Misc

Name Date 2/28/2003Address Order No.City Berkeley State CA ZIP 94704 RepPhone FOB Destination

Qty Unit Price TOTAL5 90.00$ 450.00$

Terms: 1/15,N/45 SubTotal 450.00$ Shipping




Plywood Wholesalers5543 92nd Ave. S.

Alderwood, CA 92110


DescriptionSheets 10 ply, 5mm, Finish Birch

InvoicesInvoices


Mode of ShippingMode of Shipping FOB destinationFOB destination

Seller pays for shipping (freight)Seller pays for shipping (freight) Title (rights of ownership) transfer to buyer when the goods Title (rights of ownership) transfer to buyer when the goods

are receivedare received FOB shippingFOB shipping

Buyer pays for shipping (freight)Buyer pays for shipping (freight) Title (rights of ownership) transfer to buyer when the goods Title (rights of ownership) transfer to buyer when the goods

are delivered to the shipperare delivered to the shipper Shipping costs:Shipping costs:

Listed on invoice & paid with invoice totalListed on invoice & paid with invoice totaloror

Paid directly to shipperPaid directly to shipper *FOB = free on board*FOB = free on board


Customers & VendorsCustomers & Vendors

When we buy something from a business, they When we buy something from a business, they are called:are called: SuppliersSuppliers CreditorsCreditors VendorVendor

When we sell something to another business or When we sell something to another business or individual, they are called:individual, they are called: CustomerCustomer


Cash DiscountsCash Discounts Discounts given as an incentive to pay the bill Discounts given as an incentive to pay the bill

earlyearly Why?Why? Cash is king!Cash is king!

Or, “Cash is Queen! (Why not?)Or, “Cash is Queen! (Why not?) Seller records as a “Sales Discount”Seller records as a “Sales Discount”

Reduction in salesReduction in sales Buyer records as a “Purchase Discount”Buyer records as a “Purchase Discount”

Reduction in purchasesReduction in purchases Not all sellers offer cash discountsNot all sellers offer cash discounts


““Purchases Discount”Purchases Discount”Reduction in PurchasesReduction in Purchases

2/10, N/302/10, N/30

2% Discount on InvoiceTotal (after any returns or

allow. & not IncludingFreight) If Paid Within…

10 Days From The Dateon the Invoice – Start

Counting One Day AfterInvoice Date

“Net”If You Don’t Take

Discount, You Must Pay“Net Due” By…

30 Days After InvoiceDate

“Two Ten Net Thirty”


““Sales Discount”Sales Discount”Reduction in SalesReduction in Sales

2/10, N/302/10, N/30

2% Discount on InvoiceTotal (after any returns or

allow. & not IncludingFreight) If Paid Within…

10 Days From The Dateon the Invoice – Start

Counting One Day AfterInvoice Date

“Net”If You Don’t Take

Discount, You Must Pay“Net Due” By…

30 Days After InvoiceDate

“Two Ten Net Thirty”


Credit PeriodCredit Period

The time the seller allows the buyer before full The time the seller allows the buyer before full payment on a charge sale has to be madepayment on a charge sale has to be made

2/10, N/302/10, N/30 The “N/30” is the credit periodThe “N/30” is the credit period

The credit period for the customer is 30 The credit period for the customer is 30 days longdays long


Invoice No. 4369

INVOICE

Customer Misc

Name Date 2/23/2003Address Order No.City Watermore State MD ZIP 40025 RepPhone FOB Shipping Point

Qty Unit Price TOTAL15 10.00$ 150.00$ 8 12.50$ 100.00$

SubTotal 250.00$ Shipping




Our Customers Have Many Happy Returns!


Berkeley, CA 94704

Kite Flight1414 43rd Ave.

DescriptionBellensDuece

Terms: 2/10,N/30

Invoice No. 104963

INVOICE

Customer Misc

Name Date 2/28/2003Address Order No.City Berkeley State CA ZIP 94704 RepPhone FOB Destination

Qty Unit Price TOTAL5 90.00$ 450.00$

Terms: 1/15,N/45 SubTotal 450.00$ Shipping




Plywood Wholesalers5543 92nd Ave. S.

Alderwood, CA 92110


DescriptionSheets 10 ply, 5mm, Finish Birch

Determine Cash Discounts According To Determine Cash Discounts According To Credit TermsCredit Terms



Sales discountsSales discounts Kite Flight (our customer) pays us within the Kite Flight (our customer) pays us within the

10 day discount period: 2/10,N/3010 day discount period: 2/10,N/30

Invoice Total = $250.00Discount250 x 2% = $5.00

Cash We Receive $245.00

Description Debit Credit2003

Feb 27 Cash 245.00Sales Discount 5.00

Accounts Receivable - Kite Flight 250.00Kite Flight Pays by Ch# 2310, paying w ithin discount period

Date



Purchase discountsPurchase discounts We pay our supplier (Plywood Wholesaler) We pay our supplier (Plywood Wholesaler)

within the 15 day discount period: 1/15,N/45within the 15 day discount period: 1/15,N/45

Invoice Total = $450.00Discount450 x 1% = $4.50

Cash We Pay $445.50


Feb 28 Accounts Payable - Plywood Wholesaler 450.00Purchase Discount 4.50Cash 445.50

Pay Inv # 344 w ith Ch# 4567, paying w ithin discount period

Date


Credit Card ExpenseCredit Card Expense When businesses accept credit When businesses accept credit

card payments from customers, card payments from customers, the business must pay the the business must pay the credit card company a feecredit card company a fee

The expense is called:The expense is called: Credit card expense Credit card expense

Invoice Total for5 Boomerangs = $100.00(8.25%) Sales Tax100 x 8.25% = $8.25Total $108.25

(3.5%) Credit Card Expense108.25 x 3.5% = $3.79

Credit Card Co. Deposits $ inBusiness Checking Account108.25 - 3.79 = $104.46


Feb 26 Cash 104.46Credit Card Expense 3.79

Sales Tax Payable 8.25Boomerang Sales Revenue 100.00

Credit Card Sales: Deposit from Credit Card Company for sale of boomerangs

Date


NotesNotes

Notes PayableNotes Payable The account The account

containing the containing the balance of balance of promissory notespromissory notes

LiabilityLiability ““Debt”Debt”

Promissory NotePromissory Note A written promise to A written promise to

pay a specified pay a specified amount at a specified amount at a specified timetime

Issuer records:Issuer records: Notes receivableNotes receivable

AssetAsset Holder records:Holder records:

Notes payableNotes payable LiabilityLiability


New Transaction for this Chapter:New Transaction for this Chapter: When we borrow $600 from the bank, the account on our When we borrow $600 from the bank, the account on our

books is called:books is called: Notes payable (We Owe Notes payable (We Owe Debt) Debt)

When we pay off the notes payable and the interest we When we pay off the notes payable and the interest we owe ($600 N.P. & $60 interest):owe ($600 N.P. & $60 interest):

Description Debit Credit2001March 15 Cash 600.00

Notes Payable 600.00Received Loan from BofA @ 10%

Date

Description Debit Credit2002March 15 Notes Payable 600.00

Interest Expense 60.00Cash 660.00

Pay BofA for Loan w ith Interest of $60 w ith Ch# 4467

Date


Special JournalsSpecial Journals Books of original entryBooks of original entry (S) Sales Journal (chapter 10):(S) Sales Journal (chapter 10):

Merchandise sales on accountMerchandise sales on account (P) Purchase Journal (chapter 10)(P) Purchase Journal (chapter 10)

Merchandise purchases on accountMerchandise purchases on account (CR) Cash Receipts journal (chapter 11)(CR) Cash Receipts journal (chapter 11)

Cash ReceivedCash Received (CP) Cash Payments journal (chapter 11)(CP) Cash Payments journal (chapter 11)

Cash PaymentsCash Payments (J) the General Journal handles all other (J) the General Journal handles all other

transactionstransactions


Special JournalsSpecial Journals

Why special journals? Special journals help to:Why special journals? Special journals help to: Avoid repetitious recording activitiesAvoid repetitious recording activities Separate different duties within the Separate different duties within the

accounting department which help to:accounting department which help to: Increases efficiency Increases efficiency Reduce theft and fraudReduce theft and fraud

Separation of dutiesSeparation of duties


Sales Journal - Chapter 10Sales Journal - Chapter 10

Journalizing:Journalizing: Record “on account” salesRecord “on account” sales Page 336Page 336

DateDate Invoice #Invoice # NameName Posting referencePosting reference Accounts ReceivableAccounts Receivable

DebitDebit Sales Tax PayableSales Tax Payable

CreditCredit SalesSales

CreditCredit DR = CR on every line!DR = CR on every line!

Posting:Posting: Picture, page 337Picture, page 337 Each time you record a business Each time you record a business

transaction:transaction: Post amount to customer’s Post amount to customer’s

account in the Accounts account in the Accounts Receivable subsidiary ledgerReceivable subsidiary ledger

After you post, place check mark After you post, place check mark in the sales journal posting in the sales journal posting reference column next to the reference column next to the customer's namecustomer's name

At the end of the periodAt the end of the period Double lines (page 336)Double lines (page 336) Check that DR = CRCheck that DR = CR Post all totals to general ledgerPost all totals to general ledger After you post, place account After you post, place account

numbers below column totals in numbers below column totals in sales journalsales journal


Accounts Receivable LedgerAccounts Receivable Ledger We have a separate ledger just for the customers We have a separate ledger just for the customers

accounts receivable!!accounts receivable!! ““Subsidiary ledger”Subsidiary ledger” This ledger only has accounts for customersThis ledger only has accounts for customers

One for each customer: see page 338 to 339One for each customer: see page 338 to 339 Most computerized systems use account numbers, not check Most computerized systems use account numbers, not check

marks during postingmarks during posting (Accounts Receivable) is listed in the general ledger:(Accounts Receivable) is listed in the general ledger:

At the end of the period we post the accounts receivable At the end of the period we post the accounts receivable total amount from the sales journaltotal amount from the sales journal

““Controlling account”Controlling account” At the end of the period, we must prepare a Schedule of At the end of the period, we must prepare a Schedule of

Accounts Receivable!!Accounts Receivable!! Picture on page 341Picture on page 341


Purchase Journal - Chapter 10Purchase Journal - Chapter 10

The Purchase Journal is the flip-side of the The Purchase Journal is the flip-side of the Sales JournalSales Journal

The company selling uses the Sales Journal The company selling uses the Sales Journal (chapter 10)(chapter 10)

The company buying uses the Purchase Journal The company buying uses the Purchase Journal (chapter 10)(chapter 10)

Do companies use both?Do companies use both? Yes!Yes!


Record Transactions in 3-Column Record Transactions in 3-Column Purchase Journal (Ch 10)Purchase Journal (Ch 10)

Journalizing:Journalizing: Record “on account” Record “on account”

merchandise purchasesmerchandise purchases Page 374Page 374

Journalizing dateJournalizing date NameName Invoice #Invoice # Invoice date!Invoice date! TermsTerms PRPR Accounts PayableAccounts Payable

CreditCredit Freight inFreight in

DebitDebit PurchasesPurchases

DebitDebit DR = CR on every line!DR = CR on every line!

Posting (pagesPosting (pages 347 to 350) 347 to 350) Each time you record a business Each time you record a business

transaction:transaction: Post amount to supplier’s account Post amount to supplier’s account

in the Accounts Payable in the Accounts Payable subsidiary ledgersubsidiary ledger

After you post, place check mark After you post, place check mark in the Purchases Journal posting in the Purchases Journal posting reference columnreference column

At the end of the periodAt the end of the period Double linesDouble lines Crossfooting:Crossfooting:

Accounts payable column = sum of all debits?Accounts payable column = sum of all debits? Horizontal & vertical addition to prove DR = Horizontal & vertical addition to prove DR =

CRCR

Post all totals to general ledgerPost all totals to general ledger After you post, place account After you post, place account

numbers below column totals in numbers below column totals in purchases journalpurchases journal


Accounts Payable LedgerAccounts Payable Ledger We have a separate ledger just for the suppliers’ We have a separate ledger just for the suppliers’

accounts payable!accounts payable! ““Subsidiary ledger”Subsidiary ledger” This ledger only has accounts for suppliersThis ledger only has accounts for suppliers

One for each supplier: see page 349 to 350One for each supplier: see page 349 to 350 Most computerized systems use account numbers, not check Most computerized systems use account numbers, not check

marks during postingmarks during posting

(Accounts Payable) is listed in the general ledger:(Accounts Payable) is listed in the general ledger: At the end of the period we post the accounts payable total At the end of the period we post the accounts payable total

amount from the purchase journalamount from the purchase journal ““Controlling account”Controlling account”

At the end of the period, we must prepare a Schedule of At the end of the period, we must prepare a Schedule of Accounts Payable!Accounts Payable! Picture on page 350Picture on page 350


Journalize “Sales Returns & Journalize “Sales Returns & Allowances”Allowances”

““Sales Returns & Allowances”Sales Returns & Allowances” Contra revenueContra revenue Reduces the sales revenue accountReduces the sales revenue account

Credit memorandums (example page 342)Credit memorandums (example page 342) ““Written statement indicating a seller’s willingness to Written statement indicating a seller’s willingness to

reduce the amount of the buyer’s debt.”reduce the amount of the buyer’s debt.” Seller says to customer: “I'll reduce the amount you owe Seller says to customer: “I'll reduce the amount you owe

us.”us.” Dodson Plumbing Supply tells Barlow that they will Dodson Plumbing Supply tells Barlow that they will

reduce the amount he owns them by $54.00reduce the amount he owns them by $54.00 Journal entry: credit Accounts Receivable, debit “Sales Journal entry: credit Accounts Receivable, debit “Sales

Returns & Allowances”Returns & Allowances” Why is it called “credit” memorandum?Why is it called “credit” memorandum?

Because it’s from the seller’s point of viewBecause it’s from the seller’s point of view Credit to Accounts Receivable!Credit to Accounts Receivable!


Post “Sales Returns & Post “Sales Returns & Allowances”Allowances”

Post Post “Sales Returns & Allowances” to “Sales “Sales Returns & Allowances” to “Sales Returns & Allowances” accountReturns & Allowances” account

Then post twice to the Account Receivable Then post twice to the Account Receivable accountsaccounts

What do you mean I have to post twice?What do you mean I have to post twice? Page 343Page 343

Because we have to post once to the Account Because we have to post once to the Account Receivable in the General Ledger & once to the Receivable in the General Ledger & once to the customer’s individual Accounts Receivable in the customer’s individual Accounts Receivable in the Accounts Receivable subsidiary ledgerAccounts Receivable subsidiary ledger

113/113/√√


Journalize and Post “Sales Journalize and Post “Sales Returns & Allowances”Returns & Allowances”

Returns involving sales taxReturns involving sales tax Page 344Page 344


Journalize Transactions Involving “Purchase Journalize Transactions Involving “Purchase Returns & Allowances” in General JournalReturns & Allowances” in General Journal

Flip side of Sales Returns & AllowancesFlip side of Sales Returns & Allowances Excellent note left upper corner page 351Excellent note left upper corner page 351

The buyer receives a credit memorandumThe buyer receives a credit memorandum Page 351 – good t-account examplePage 351 – good t-account example

Journalizing & posting – page 352Journalizing & posting – page 352 Must post to both:Must post to both:

Accounts Payable (control account) in General LedgerAccounts Payable (control account) in General Ledger Individual’s Accounts Payable in Accounts Payable Individual’s Accounts Payable in Accounts Payable

subsidiary ledgersubsidiary ledger 221/221/√√


Cash Receipts Journal (Ch 11)Cash Receipts Journal (Ch 11)

Contains all transactions in which Contains all transactions in which cash is receivedcash is received

All debits to cash!All debits to cash! If you receive cash, you must put If you receive cash, you must put

it here!it here! Example on page 384Example on page 384

Each line represents a Each line represents a transaction where we receive transaction where we receive cashcash

DR = CR for each lineDR = CR for each line All the way at the end:All the way at the end:

Cash debitCash debit Credit card debitCredit card debit

All the rest are creditsAll the rest are credits Post after each journal entry:Post after each journal entry:

Accounts Receivable (PR = Accounts Receivable (PR = √)√) ““other accounts” (PR = # for other accounts” (PR = # for

that account)that account)

At the end of the period:At the end of the period: Date for last dayDate for last day Single line before totalingSingle line before totaling Double line after totalsDouble line after totals Post all the column totalsPost all the column totals

After posting, place account # After posting, place account # under column totalsunder column totals

Place “X” under “other Place “X” under “other accounts” to indicate that you accounts” to indicate that you already posted these already posted these amountsamounts

Make sure that DR = CRMake sure that DR = CR


Cash Payments Journal (Ch 11)Cash Payments Journal (Ch 11) Contains all transactions in which Contains all transactions in which

cash goes out, or is paid outcash goes out, or is paid out All credits to cash!All credits to cash! If you pay cash, you must put it If you pay cash, you must put it

here!here! Remember rule about cash:Remember rule about cash:

Always pay with a check!Always pay with a check! Example on page 391Example on page 391

Each line represents a Each line represents a transaction where we write a transaction where we write a check to pay cashcheck to pay cash

DateDate List checks in consecutive List checks in consecutive

order (even void checks)order (even void checks) Name of account debitedName of account debited All the way at the endAll the way at the end

Cash creditCash credit Purchase discount creditPurchase discount credit

All the rest are debitsAll the rest are debits DR = CR for each lineDR = CR for each line

Post after each journal entry:Post after each journal entry: Accounts Payable (PR = √)Accounts Payable (PR = √) ““other accounts” (PR = # for that other accounts” (PR = # for that

account)account)


After posting, place After posting, place account # under column account # under column totalstotals

Place “X” under “other Place “X” under “other accounts” to indicate that accounts” to indicate that you already posted these you already posted these amountsamounts

Make sure that DR = Make sure that DR = CRCR


Check & Deposit RegisterCheck & Deposit Register

When we do Spa Magic, in addition to the cash When we do Spa Magic, in addition to the cash receipts and cash payments journals, we will receipts and cash payments journals, we will have to record all checking account activity in a have to record all checking account activity in a checkbook registercheckbook register


Good NoteGood Note

Page 398:Page 398: Post from special journals in this order:Post from special journals in this order:

Sales journalSales journal Purchase journalPurchase journal Cash receipts journalCash receipts journal Cash payments journalCash payments journal


Review Of Chapter 10 & 11Review Of Chapter 10 & 11

Sales JournalSales Journal Purchase JournalPurchase Journal Cash Receipts JournalCash Receipts Journal Cash Payments JournalCash Payments Journal


Sales JournalSales Journal

Journalizing:Journalizing: Record “on account” salesRecord “on account” sales Page 336Page 336

DateDate Invoice #Invoice # NameName Posting referencePosting reference Accounts ReceivableAccounts Receivable

DebitDebit Sales Tax PayableSales Tax Payable

CreditCredit SalesSales

CreditCredit DR = CR on every line!DR = CR on every line!

Posting:Posting: Picture, page 337Picture, page 337 Each time you record a business Each time you record a business

transaction:transaction: Post amount to customer’s Post amount to customer’s

account in the Accounts account in the Accounts Receivable subsidiary ledgerReceivable subsidiary ledger

After you post, place check mark After you post, place check mark in the sales journal posting in the sales journal posting reference column next to the reference column next to the customer's namecustomer's name

At the end of the periodAt the end of the period Double lines (page 336)Double lines (page 336) Check that DR = CRCheck that DR = CR Post all totals to general ledgerPost all totals to general ledger After you post, place account After you post, place account

numbers below column totals in numbers below column totals in sales journalsales journal


Record Transactions in 3-Column Record Transactions in 3-Column Purchase JournalPurchase Journal

Journalizing:Journalizing: Record “on account” Record “on account”

merchandise purchasesmerchandise purchases Page 374Page 374

Journalizing dateJournalizing date NameName Invoice #Invoice # Invoice date!Invoice date! TermsTerms PRPR Accounts PayableAccounts Payable

CreditCredit Freight inFreight in

DebitDebit PurchasesPurchases

DebitDebit DR = CR on every line!DR = CR on every line!

Posting (pagesPosting (pages 347 to 350) 347 to 350) Each time you record a business Each time you record a business

transaction:transaction: Post amount to supplier’s account in Post amount to supplier’s account in

the Accounts Payable subsidiary the Accounts Payable subsidiary ledgerledger

After you post, place check mark in After you post, place check mark in the Purchases Journal posting the Purchases Journal posting reference columnreference column

At the end of the periodAt the end of the period Double linesDouble lines Crossfooting:Crossfooting:

Accounts payable column = sum of all debits?Accounts payable column = sum of all debits? Horizontal & vertical addition to prove DR = CRHorizontal & vertical addition to prove DR = CR

Post all totals to general ledgerPost all totals to general ledger After you post, place account After you post, place account

numbers below column totals in numbers below column totals in purchases journalpurchases journal


Cash Receipts JournalCash Receipts Journal

Contains all transactions in which Contains all transactions in which cash is receivedcash is received

All debits to cash!All debits to cash! If you receive cash, you must put If you receive cash, you must put

it here!it here! Example on page 384Example on page 384

Each line represents a Each line represents a transaction where we receive transaction where we receive cashcash

DR = CR for each lineDR = CR for each line All the way at the end:All the way at the end:

Cash debitCash debit Credit card debitCredit card debit

All the rest are creditsAll the rest are credits Post after each journal entry:Post after each journal entry:

Accounts Receivable (PR = Accounts Receivable (PR = √)√) ““other accounts” (PR = # for other accounts” (PR = # for

that account)that account)


After posting, place account # After posting, place account # under column totalsunder column totals

Place “X” under “other Place “X” under “other accounts” to indicate that you accounts” to indicate that you already posted these already posted these amountsamounts

Make sure that DR = CRMake sure that DR = CR


Cash Payments JournalCash Payments Journal Contains all transactions in which Contains all transactions in which

cash goes out, or is paid outcash goes out, or is paid out All credits to cash!All credits to cash! If you pay cash, you must put it If you pay cash, you must put it

here!here! Remember rule about cash:Remember rule about cash:

Always pay with a check!Always pay with a check! Example on page 391Example on page 391

Each line represents a Each line represents a transaction where we write a transaction where we write a check to pay cashcheck to pay cash

DateDate List checks in consecutive List checks in consecutive

order (even void checks)order (even void checks) Name of account debitedName of account debited All the way at the endAll the way at the end

Cash creditCash credit Purchase discount creditPurchase discount credit

All the rest are debitsAll the rest are debits DR = CR for each lineDR = CR for each line

Post after each journal entry:Post after each journal entry: Accounts Payable (PR = √)Accounts Payable (PR = √) ““other accounts” (PR = # for that other accounts” (PR = # for that

account)account)


After posting, place After posting, place account # under column account # under column totalstotals

Place “X” under “other Place “X” under “other accounts” to indicate that accounts” to indicate that you already posted these you already posted these amountsamounts

Make sure that DR = Make sure that DR = CRCR


Demonstration ProblemDemonstration Problem

Journalize and post one transaction in the sales Journalize and post one transaction in the sales journaljournal

Look at a schedule of accounts receivableLook at a schedule of accounts receivable


Page 32Sales Tax 8.00%

Inv.No. Customer's Name

Post.Ref.

AccountsReceivable

Debit

Sales TaxPayableCredit

SalesCredit

1 2002 12 July 1 788 Denise Hogan 1,438.83 106.58 1,332.25 23 34 45 56 67 78 89 9

10 1011 1112 1213 1314 1415 1516 1617 1718 1819 1920 2021 2122 31 1,438.83 106.58 1,332.25 22

Date

Sales JournalTransaction on One LineTransaction on One Line


Post to Subsidiary LedgerPost to Subsidiary Ledger

Denise Hogan322 West James, Apartment A9Whalen, WA 98671

ItemPost.Ref. Debit Credit Balance

2005July 1 S 32 1,438.83 1,438.83

Total Owed: 1,438.83

Address

Date

Name


Place Post. Ref. in Journal!Place Post. Ref. in Journal!Page 32

Sales Tax 8.00%


Post.Ref.

AccountsReceivable

Debit


SalesCredit

1 2005 12 July 1 788 Denise Hogan √ 1,438.83 106.58 1,332.25 23 34 45 56 67 78 89 9

10 1011 1112 1213 1314 1415 1516 1617 1718 1819 1920 2021 2122 31 1,438.83 106.58 1,332.25 22

Date

Sales Journal


Total at End of Period and Post TotalsTotal at End of Period and Post TotalsPage 32

Sales Tax 8.00%


Post.Ref.

AccountsReceivable

Debit


SalesCredit

1 2005 12 July 1 788 Denise Hogan √ 1,438.83 106.58 1,332.25 23 6 789 The River Riders √ 978.75 978.75 34 8 790 Chris Turk √ 4,590.00 340.00 4,250.00 45 9 791 Riverside Rentals √ 15,721.00 15,721.00 56 14 792 Kent Recreation Department √ 21,038.40 1,558.40 19,480.00 67 17 793 Maple Van Auken √ 3,980.34 294.84 3,685.50 78 23 794 River Tours, Inc √ 7,038.00 7,038.00 89 23 795 Vickie and Larry Currie √ 842.08 62.38 779.70 9

10 24 796 Sundowner Tours √ 6,144.00 6,144.00 1011 31 797 Kathy Walker √ 398.90 29.55 369.35 1112 1213 1314 1415 1516 1617 1718 1819 1920 2021 2122 31 62,170.30 2,391.75 59,778.55 22

Date

Sales Journal

Post


Post Accounts ReceivablePost Accounts Receivable

Account Accounts Receivable Account No. 114

Debit Credit2005July 1 Balance √ 65,458.04 65,458.04

10 J 168 23.25 65,434.7921 J 168 108.00 65,326.7931 S 32 62,170.30 127,497.09

General Ledger

Date ItemPost.Ref. Debit Credit

Balance


Post. Ref. = 114Post. Ref. = 114Page 32

Sales Tax 8.00%


Post.Ref.

AccountsReceivable

Debit


SalesCredit


10 24 796 Sundowner Tours √ 6,144.00 6,144.00 1011 31 797 Kathy Walker √ 398.90 29.55 369.35 1112 1213 1314 1415 1516 1617 1718 1819 1920 2021 21

31 62,170.30 2,391.75 59,778.55114

Date

Sales Journal

( )

Post


Post Sales Tax PayablePost Sales Tax Payable

Account Sales Tax Payable Account No 213

Debit Credit2005July 1 Balance √ 3,085.19 3,085.19

14 CP 41 3,085.19 0.0021 J 168 8.00 8.0031 S 32 2,391.75 2,383.75

General Ledger

Date Item Debit CreditBalancePost.

Ref.



Sales Tax 8.00%


Post.Ref.

AccountsReceivable

Debit


SalesCredit


10 24 796 Sundowner Tours √ 6,144.00 6,144.00 1011 31 797 Kathy Walker √ 398.90 29.55 369.35 1112 1213 1314 1415 1516 1617 1718 1819 1920 2021 2122 31 62,170.30 2,391.75 59,778.55 2223 114 213 23

Date

Sales Journal

( ) ( )

Post


Post SalesPost Sales

Account Sales Account No 411

Post.Ref.

Debit Credit2005July 31 S 32 59,778.55 59,778.55

General Ledger

Date Item Debit CreditBalance



Sales Tax 8.00%


PostRef

AccountsReceivable

Debit


SalesCredit


10 24 796 Sundowner Tours √ 6,144.00 6,144.00 1011 31 797 Kathy Walker √ 398.90 29.55 369.35 1112 1213 1314 1415 1516 1617 1718 1819 1920 2021 2122 31 62,170.30 2,391.75 59,778.55 2223 114 213 411 23

Date

Sales Journal

( ) ( ) ( )


Page 32


Post.Ref.

AccountsReceivable

Debit


SalesCredit


10 24 796 Sundowner Tours √ 6,144.00 6,144.00 1011 31 797 Kathy Walker √ 398.90 29.55 369.35 1112 1213 1314 1415 1516 1617 1718 1819 1920 2021 2122 31 62,170.30 2,391.75 59,778.55 2223 114 213 411 23

DR = CR62,170.30 Yes 62,170.30

Date

Sales Journal

Prove DR = CRProve DR = CR( ) ( ) ( )


At the End of the Period, Track At the End of the Period, Track What Customers Owe YouWhat Customers Owe You

Vickie and Larry Currie 842.08$ Denise Hogan 1,438.83 Kent Recreation Department 21,038.40 Chris Turk 4,590.00 Maple Van Auken 3,980.34 Kathy Walker 398.90 The River Riders 978.75 Riverside Rentals 15,721.00 River Tours 7,038.00 Sundowner Tours 6,144.00

Total Accounts Receivable 62,170.30$

Dean's KayaksSchedule of Accounts Receivable

July 31, 2005


Demonstration ProblemDemonstration Problem

We will journalize and post a transaction in the We will journalize and post a transaction in the cash payments journalcash payments journal


Cash Payments Journal with a Cash Payments Journal with a Previously Recorded TransactionPreviously Recorded Transaction

Page 41

Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscount

CreditCashCredit

1 20— 12 July 1 1753 Mortgage Payable 220 369.99 23 Interest Expense 812 1,945.46 2,315.45 34 45 5

Date

Cash Payments Journal


Record Payment of Record Payment of Advertising ExpenseAdvertising Expense

Page 41

Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscount

CreditCashCredit

1 20— 12 July 1 1753 Mortgage Payable 220 369.99 23 Interest Expense 812 1,945.46 2,315.45 34 3 1754 Advertising Expense 8,000.00 8,000.00 45 5

Date



Post to Advertising ExpensePost to Advertising Expense

Account Advertising Expense Account No 613

Post.Ref. Debit Credit

20—July 3 CP 41 8,000.00 8,000.00

General Ledger



Post. Ref. = 613Post. Ref. = 613

Page 41

Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscount

CreditCashCredit

1 20— 12 July 1 1753 Mortgage Payable 220 369.99 23 Interest Expense 812 1,945.46 2,315.45 34 3 1754 Advertising Expense 613 8,000.00 8,000.00 45 5

Date



At End of Period, Total All At End of Period, Total All ColumnsColumns

Page 41

Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscounts

CreditCashCredit

1 20— 1 12 July 2 1753 Mortgage Payable 220 369.99 23 3 Interest Expense 812 1,945.46 2,315.45 34 4 1754 Advertising Expense 613 8,000.00 8,000.00 45 5 1755 All-Sports Apparel √ 1,024.10 1,024.10 56 6 1756 Prepaid Insurance 118 1,775.42 1,775.42 67 7 1757 Apparel Outlet √ 9,827.00 196.54 9,630.46 78 skip 8 1758 KayakCo √ 28,155.00 563.10 27,591.90 8

28 lines 31 1775 Utilities Expense 657 128.90 128.90 2829 31 1776 Utilities Expense 657 148.85 148.85 2930 31 1777 State Unemployment Tax Payable 216 185.00 185.00 3031 31 Miscellaneous Expense 659 12.00 12.00 31

31 24,720.93 61,750.87 1,125.69 85,346.11

Date



Other Accounts Debit Post. Other Accounts Debit Post. Ref. = XRef. = X

Page 41

Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscounts

CreditCashCredit

1 20— 12 July 1 1753 Mortgage Payable 220 369.99 23 Interest Expense 812 1,945.46 2,315.45 34 3 1754 Advertising Expense 613 8,000.00 8,000.00 45 3 1755 All-Sports Apparel √ 1,024.10 1,024.10 56 8 1756 Prepaid Insurance 118 1,775.42 1,775.42 67 9 1757 Apparel Outlet √ 9,827.00 196.54 9,630.46 78 skip 9 1758 KayakCo √ 28,155.00 563.10 27,591.90 8


31 24,720.93 61,750.87 1,125.69 85,346.11(X)

Date


POST


Post to 111Post to 111

Account Cash Account No 111


20—July 1 Balance √ 51,278.10 51,278.10

31 CR 37 97,355.43 148,633.5331 CP 41 85,346.11 63,287.42

General Ledger




Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscount

CreditCashCredit



31 24,720.93 61,750.87 1,125.69 85,346.11(X) (111)

Date


POST



Account Accounts Payable Account No 211


20—July 1 Balance √ 16,865.82 16,865.82

15 J 168 89.95 16,775.8731 P 29 57,527.50 74,303.3731 CP 41 61,750.87 12,552.50

General Ledger




DateCk.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscount

CreditCashCredit



31 24,720.93 61,750.87 1,125.69 85,346.11(X) (211) (111)


POST



Account Purchases Discount Account No 513


20—July 31 CP 41 1,125.69 1,125.69

General Ledger

Date Item Debit Credit

Balance



Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscount

CreditCashCredit



31 24,720.93 61,750.87 1,125.69 85,346.11(X) (211) (513) (111)

Date



Prove DR = CRProve DR = CRPage 41

Ck.No. Account Name

Post.Ref.

OtherAccounts

Debit

AccountsPayable

Debit

PurchasesDiscount

CreditCashCredit



31 24,720.93 61,750.87 1,125.69 85,346.11(X) (211) (513) (111)

DR = CR86,471.80 Yes 86,471.80

Date


accounting is fun! 1 chapter 10 & 11 special journals

Documents

sales discountreduction

sales accountaccount

purchases account

account salesreduction

specific accounts

merchandising firmaccounts

merchandising firmliabilities

merchandising firmexpenses