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Accounting for Purchases and Accounts Payable

Chapter. 8. Accounting for Purchases and Accounts Payable. Section 2: Accounts Payable. Section Objectives. Post credit purchases from the purchases journal to the accounts payable subsidiary ledger.

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Accounting for Purchases and Accounts Payable

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  1. Chapter 8 Accountingfor Purchasesand Accounts Payable Section 2: Accounts Payable Section Objectives • Post credit purchases from the purchases journal to the accounts payable subsidiary ledger. • Record purchases returns and allowances in the general journal and post them to the accounts payable subsidiary ledger. • Prepare a schedule of accounts payable. • Compute the net delivered cost of purchases. • Demonstrate a knowledge of the procedures for effective internal control of purchases.

  2. Purchases Returns and Allowances

  3. Objective 4 Record purchases returns and allowances in the general journal and post them to the accounts payable subsidiary ledger.

  4. QUESTION: What is a purchase return? ANSWER: A purchase return is a return of unsatisfactory goods. Sorry, I didn’t like the color.

  5. QUESTION: What is a purchase allowance? ANSWER: A purchase allowance is a price reduction from the amount originally billed.

  6. A credit to the Purchases Returns and Allowances account is preferred to making a direct credit to Purchases. Purchases Returns and Allowances

  7. A credit to the Purchase Returns and Allowances account is preferred to making a direct credit to Purchases. Purchases Returns and Allowances Returns and Allowances

  8. Purchases Returns and Allowances Account • A complete record of returns and allowances • A contra cost of goods sold account • Normal credit balance

  9. Recording Purchases Returns and Allowances

  10. Business Transaction On January 30 The Style Shop received a credit memorandum for $476 from International Apparel Shop as an allowance for damaged merchandise. International Apparel Shop 1718 Sherry Lane Dallas, TX 75267 The Style Shop 2007 Trendsetter Lane Dallas, TX 75268 $476.00

  11. Purchase Allowance Which account is credited? Which account is debited? For what amount? For what amount?

  12. Purchase Allowance Accounts Payable Purchases Returns and Allowances 476 476

  13. Posting a Purchases Return or Allowance

  14. Whether recorded in the general journal or in a special journal, it is important to promptly post returns and allowances to the creditor’s account in the accounts payable ledger.

  15. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. REF. DEBIT CREDITJan. 30 Accounts Payable/ 205/ ü 476.00 International Apparel Shop Purchases Returns and Allowances 503 476.00 Received Credit Memo 103 for an allowance for damaged merchandise; original Invoice 7985, Jan. 23, 20-- 1 3 2 NAME International Apparel Shop TERMS n/30 ADDRESS 1718 Sherry Lane, Dallas, Texas 75267-6205 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20-- JAN. 1 Balance ü1,600.00 23 Invoice 7985, 01/23/-- P1 5,120.00 6,720.00 27 CP1 2,400.00 4,320.00 30 CM 103 J1 476.00 3,844.00 Posting from the General Journal Enter the date, the credit memorandum number, and the general journal page number.

  16. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. REF. DEBIT CREDITJan. 30 Accounts Payable/ 205/ ü 476.00 International Apparel Shop Purchases Returns and Allowances 503 476.00 Received Credit Memo 103 for an allowance for damaged merchandise; original Invoice 7985, Jan. 23, 20-- 1 3 2 NAME International Apparel Shop TERMS n/30 ADDRESS 1718 Sherry Lane, Dallas, Texas 75267-6205 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20-- JAN. 1 Balance ü1,600.00 23 Invoice 7985, 01/23/-- P1 5,120.00 6,720.00 27 CP1 2,400.00 4,320.00 30 CM 103 J1 476.00 3,844.00 4 Posting from the General Journal Enter the amount of the return or allowance in the Debit column of the creditor’s account.

  17. GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. REF. DEBIT CREDITJan. 30 Accounts Payable/ 205/ ü 476.00 International Apparel Shop Purchases Returns and Allowances 503 476.00 Received Credit Memo 103 for an allowance for damaged merchandise; original Invoice 7985, Jan. 23, 20-- 1 3 2 NAME International Apparel Shop TERMS n/30 ADDRESS 1718 Sherry Lane, Dallas, Texas 75267-6205 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20-- JAN. 1 Balance ü1,600.00 23 Invoice 7985, 01/23/-- P1 5,120.00 6,720.00 27 CP1 2,400.00 4,320.00 30 CM 103 J1 476.00 3,844.00 4 5 Posting from the General Journal Compute the new balance and enter it in the Balance column.

  18. 6 GENERAL JOURNAL PAGE 1 DATE DESCRIPTION POST. REF. DEBIT CREDITJan. 30 Accounts Payable/ 205/ ü 476.00 International Apparel Shop Purchases Returns and Allowances 503 476.00 Received Credit Memo 103 for an allowance for damaged merchandise; original Invoice 7985, Jan. 23, 20-- 1 3 2 NAME International Apparel Shop TERMS n/30 ADDRESS 1718 Sherry Lane, Dallas, Texas 75267-6205 DATE DESCRIPTION POST. DEBIT CREDIT BALANCE REF. 20-- JAN. 1 Balance ü1,600.00 23 Invoice 7985, 01/23/-- P1 5,120.00 6,720.00 27 CP1 2,400.00 4,320.00 30 CM 103 J1 476.00 3,844.00 4 5 Posting from the General Journal In the general journal, enter a check mark to show that the transaction was posted to the creditor’s account in the accounts payable subsidiary ledger.

  19. Thank You for using College Accounting, 11th Edition Price • Haddock • Brock

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