Accounting 1 – Guided Reading
Part 2-Accounting for a Merchandising Business 
Organized as a Corporation

Chapter 9	Journalizing Purchases and Cash Payments

9-1 Journalizing Purchases Using a Purchases Journal

Read the blue box on page 234 and define the following terms:
Corporation-
Share of stock-
Capital stock-
Stockholder-
Merchandising Businesses
Service businesses sell _______________________________________________, while merchandising businesses _________________________________________________. 
Define Merchandise-
What’s the difference between a retail and wholesale merchandising business? 

The Business—Hobby Shack, Inc.
How is a corporation different from a proprietorship?  

What does the concept of Going Concern mean?

Using Special Journals
	Define Special Journal:

Five journals to record daily transactions: 
___________________ Journal: for all purchases of merchandise _______________________. 
___________________ Journal: for all _____________________________________________. 
___________________ Journal: for all sales of merchandise ___________________________.
___________________ Journal: for all _____________________________________________. 
___________________ Journal: for _______________________________________________.

Purchasing Merchandise
What is the cost of merchandise? 

What is markup?  Why is it higher than cost of merchandise?

How does markup impact capital?

What is a vendor?

What type of account is the Purchases account?_________What is its normal balance?________

Draw the Purchases T-Account here:

Purchases on Account
What is recorded in the Purchases account? __________________________________
What cannot be recorded in the Purchases account?____________________________
Define Purchases on Account: 

ACCOUNTING CONCEPT!
Historical Cost:

Purchases Journal
A special journal used to record _________________________________________ is called a purchases journal.
A purchase on account is only recorded on ________________ line. 
What is the purpose of a special amount column?________________________________ and what does it eliminate? __________________________________________________________________________________
Purchase Invoice
What is a purchase invoice?  

	How does a Purchase Invoice relate to the concept of Objective Evidence?

	4 Steps in Receiving a Purchase Invoice
1.	Stamp the ______________________________
2.	Place a ________________________ by ______________________________________ to show ____________________________________________________________________
3.	Initial ______________________________________________________________________
4.	Review _____________________________________________________________________
Define Terms of Sale: 

Purchasing Merchandise on Account
	Identify the 4 Steps to Journalizing a Purchase of Merchandise on Account
1.	___________________________________________________________________________
2.	___________________________________________________________________________
3.	___________________________________________________________________________
4.	___________________________________________________________________________
Draw the T-Accounts showing a purchase on account:

Totaling and Ruling a Purchases Journal
	Read the 6 steps to Totaling and Ruling a Purchases Journal 

9-2 Journalizing Cash Payments Using a Cash Payments Journal
Cash Payments Journal
Cash payments journals only record ______________________________ transactions. 
What do vendors often do to encourage early payment? _______________________________

Define purchases discount:

In a cash payments journal, what is the general amounts column used to record?

What is the source document for most cash payments? ________________________

Cash Payment of an Expense

21

Paying cash for an expense results in a General _____________ and Cash ___________.

Using Page 21 of the Cash Payments Journal, record the transaction for November 2, Paid cash for advertising.

Buying Supplies for Cash
Using Page 21 of the Cash Payments Journal, record the transaction for November 5, Paid cash for office supplies

What is the difference between purchasing merchandise and buying supplies?

Cash Payments for Purchases
Define list price:

What is trade discount?

When a trade discount is granted, the seller’s invoice shows the ___________________ ______________ and ONLY the _____________________ is used for the journal entry. 
What are the steps for calculating trade discount? (example pg. 244)
	Step 1: 

	Step 2: 

Using Page 21 of the Cash Payments Journal, record the transaction for November 7, Purchased merchandise for cash.

Cash Payments on Account with Purchases Discounts
A cash discount is stated as a _______________________________________________. 
For example, 2/10, n/30 is a common term of sale, which is read two ten and net thirty. 
What does two ten mean?___________________________________________________________________ What does net 30 mean?____________________________________________________________________

Purchases discounts are recorded in the account _______________________________.  

What is a contra account? 

How do you calculate Purchases Discount and Cash Amount after Discount? (pg. 245)
	Step 1:

	Step 2:

Cash payments on account without a purchases discount, so the full amount is recorded in accounts payable debit and cash credit. 

Using Page 21 of the Cash Payments Journal, record the transaction for November 8, Paid cash on account.

Cash Payments on Account WITHOUT Purchases Discounts
Using Page 21 of the Cash Payments Journal, record the transaction for November 13, Paid cash on account, no discount.

9-3 Performing Additional Cash Payments Journal Operations
Petty Cash Report
What’s the difference between cash short and cash over? 

A petty cash report is prepared when the petty cash fund ________________________. 
Look at the example on page 248 and use it as a reference. 

Replenishing a Petty Cash Fund
Petty cash short and over are recorded in an account titled Cash Short and Over. The account is a ____________________________. 
What special journal is used to record replenishing the petty cash fund? ________________________________

Accounts used to replenish the petty cash fun are recorded in the general ___________ column and the cash short and over is recorded in the general ____________ column. The total amount is recorded in the _____________________________ column. 

When journalizing a cash payment to replenish petty cash, what is entered in the Account Title column of the cash payments journal?

Totaling, Proving, and Ruling a Cash Payments Journal Page
See example on page 250. All debits are recorded in 1 column and all credits are recorded in the other. Totals are added, if they equal… cash is proved. 

List the 5 steps for ruling a cash payments journal at the end of the month:
1.	_____________________________________________________________________________________ 
2.	_____________________________________________________________________________________
3.	_____________________________________________________________________________________
4.	_____________________________________________________________________________________
5.	_____________________________________________________________________________________
9-4 Journalizing Other Transactions Using a General Journal
General Journal
Not all transactions can be recorded in a special journal. Those that cannot are recorded in the _______________________________. 

Memorandum for Buying Supplies on Account
	Why is a memorandum used as the source document when supplies are bought on account?

Buying Supplies on Account
	Why are two account titles written for the credit amount when supplies are bought on account?

	When is the equality of debits and credits proved for a general journal?

Debit Memorandum for Purchases Returns and Allowances
	Define purchases return:

	Define purchases allowance:

	Define debit memorandum:

If purchases returns and allowances are a decrease in purchases, why are returns and allowances credited to a separate account?

Journalizing Purchases Returns and Allowances
	Purchases returns and allowances _____________________ the amount of purchases.

	Purchases returns and allowances is a _____________________ account.