CHAPTER TWELVE ACCOUNTING FOR PURCHASES AND CASH PAYMENTS

CHAPTER TWELVE ACCOUNTING FOR PURCHASES AND CASH PAYMENTS

PURCHASES Ø Merchandise acquired for resale: o Must be items for RESALE Ø Procedures and documents vary depending on the size of the business. Ø Can be made “on account” or for cash

PURCHASING PROCESS DOCUMENTS PURCHASE REQUISITION

PURCHASE REQUISITION Ø A form used to request the purchase of merchandise or other property Ø Can be prepared by any authorized person Ø One copy to the Purchasing department Ø One copy to the Accounting department Ø One copy kept by the department preparing the requisition

PURCHASING PROCESS DOCUMENTS PURCHASE REQUISITION PURCHASE ORDER

PURCHASE ORDER Ø A written order to buy goods from a specific vendor Ø Purchasing department reviews and approves the purchase requisition and prepares a purchase order: o One to vendor o One to the Accounting department o One kept in the Purchasing department o Copies may also be sent to the receiving area and to the department initiating the purchase

PURCHASING PROCESS DOCUMENTS PURCHASE ORDER RECEIVING REPORT

RECEIVING REPORT Ø Prepared by the receiving clerk Ø Indicates what has been received: o Including date of receipt and o condition of the goods Ø This report will be compared with the purchase order and requisition to determine if items ordered were received in good condition before payment is approved.

PURCHASING PROCESS DOCUMENTS RECEIVING REPORT PURCHASE INVOICE

PURCHASE INVOICE Ø Prepared by the seller Ø As a bill for the merchandise shipped: o Seller calls it a sales invoice. o Buyer calls it a purchase invoice. Ø Before payment is made, Accounting department compares the purchase invoices with: o Purchase Requisition o Purchase Order o Receiving Report

CASH DISCOUNTS Ø Available if the bill is paid within the discount period Ø Buyer calls it a Purchase Discount. Ø Seller calls it a Sales Discount.

TRADE DISCOUNTS Ø Often offered by manufacturers and wholesalers Ø Reduction from the list or catalog price: o Discounts offered to different classes of customers Ø Buyer and Seller both record the transaction at the NET amount (after the discount).

MERCHANDISE PURCHASES ACCOUNTS PURCHASES DISCOUNTS PURCHASES RETURNS & ALLOWANCES FREIGHT-IN

PURCHASES ACCOUNT Used to record the cost of merchandise purchased PURCHASES DR. CR. + The account is debited when merchandise is purchased.

PURCHASES ACCOUNT Used to record the cost of merchandise purchased PURCHASES DR. CR. + The account is only credited during the closing process.

GENERAL JOURNAL DATE 1 2 3 4 DESCRIPTION Purchases Cash PR DEBIT CREDIT 100 00 Made cash purchase 5 6 7 8 9 10 11 Example: Made $100 purchase for cash 100 00

GENERAL JOURNAL DATE 1 2 3 4 DESCRIPTION Purchases Accts. Payable/Vendor PR DEBIT CREDIT 100 00 Made purchase on account 5 6 7 8 9 10 11 What if the purchase had been made on account? 100 00

GENERAL JOURNAL DATE 1 2 3 4 DESCRIPTION Purchases Accts. Payable/Vendor PR DEBIT CREDIT 100 00 Made purchase on account 5 6 7 8 9 10 11 We would credit the Accounts Payable account instead of cash. 100 00

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Purchases Accts. Payable/Vendor PR DEBIT CREDIT 100 00 Made purchase on account The specific supplier is identified. 100 00

PURCHASE RETURNS AND ALLOWANCES CONTRA-PURCHASES account used to record purchase returns and purchase allowances. PURCHASES RETURNS & ALLOWANCES DR. CR. + The account is credited for the amount of returns and allowances.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION PR DEBIT CREDIT Example: Merchandise purchased on account for $200 is defective and is returned to the supplier.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Accts. Payable/Vendor PR DEBIT CREDIT 200 00 Accounts Payable is debited. The specific vendor is identified.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Accts. Payable/Vendor Pur. Returns & Allow. PR DEBIT CREDIT 200 00 Returned merchandise Purchases Returns & Allowances is credited. This account will be shown as a deduction from the Purchases account on the Income Statement.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION PR DEBIT CREDIT Example: If the same merchandise is retained but the supplier grants a price reduction of $45 because of the defects

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Accts. Payable/Vendor PR DEBIT CREDIT 45 00 Accounts Payable is debited to reflect the price reduction.

GENERAL JOURNAL DATE 1 2 3 4 DESCRIPTION Accts. Payable/Vendor Pur. Returns & Allow. PR DEBIT CREDIT 45 00 Allowance for defective merchandise 5 6 7 8 9 10 11 Purchases Returns & Allowances is credited. Same as the entry for Returns!

PURCHASES DISCOUNTS CONTRA-PURCHASES account used to record cash discounts allowed on purchases. PURCHASES DISCOUNTS DR. CR. + The account is credited for the discount granted by the vendor for prompt payment.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION PR DEBIT CREDIT Example: Merchandise is purchased for $100 on account with credit terms 2/10, n/30 and payment is made within the discount period.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Accts. Payable/Vendor PR DEBIT CREDIT 100 00 Accounts Payable is debited for the entire amount of the purchase.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Accts. Payable/Vendor Cash PR DEBIT CREDIT 100 00 Cash is credited for the actual amount paid, $98 ($100 - $2 discount). 98 00

GENERAL JOURNAL DATE 1 2 3 4 DESCRIPTION Accts. Payable/Vendor Cash Purchases Discounts PR DEBIT CREDIT 100 00 Made payment on account 5 6 7 8 9 10 11 Purchase Discounts is credited for the discount amount, $2 ($100 x 2%). 98 00 2 00

FREIGHT-IN ADJUNCT-PURCHASES account used to record transportation charges on merchandise purchases. FREIGHT-IN DR. CR. + The account is debited for transportation charges.

TRANSPORTATION CHARGES Ø Expressed as FOB (Free on Board) o FOB Shipping Point: • Buyer pays for transportation. • Freight charges are either listed on invoice or sent as a separate bill. o FOB Destination: • Seller pays for transportation.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION PR DEBIT CREDIT Example: Merchandise was purchased on account for $400 plus freight charges of $38.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Purchases PR DEBIT CREDIT 400 00 Purchases is debited only for the cost of the merchandise.

GENERAL JOURNAL DATE DESCRIPTION PR DEBIT CREDIT 1 2 3 4 Purchases Freight-In 5 Freight-In is debited for the transportation costs. 6 7 8 9 10 11 400 00 38 00

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Purchases Freight-In Accts. Payable/Vendor PR DEBIT CREDIT 400 00 38 00 Made purchase on account Accounts Payable is credited for the entire purchase price (merchandise + freight). 438 00

GENERAL JOURNAL DATE DESCRIPTION PR DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 What if the freight charges were on a separate bill from the transportation company?

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Purchases PR DEBIT CREDIT 400 00 Purchases is again debited for the cost of the merchandise.

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Purchases Accts. Payable/Vendor PR DEBIT CREDIT 400 00 Made purchase on account Accounts Payable is credited for the amount due to the supplier. 400 00

GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 DESCRIPTION Purchases Accts. Payable/Vendor PR DEBIT CREDIT 400 00 Made purchase on account A separate journal entry is made to record the freight charges. 400 00

GENERAL JOURNAL DATE DESCRIPTION 1 2 3 4 Purchases Accts. Payable/Vendor 5 Freight-In Accts. Payable/Vendor 6 7 8 9 10 11 PR DEBIT CREDIT 400 00 Made purchase on account 38 00 Freight charges on purchase Accounts Payable is credited, but the vendor is the transportation company. 38 00

GROSS PROFIT Ø Also called Gross Margin Ø Difference between Net Sales and Cost of Goods Sold Ø Tells management the amount of sales dollars available to cover expenses, after covering the cost of the goods sold

GROSS PROFIT FORMULA: NET SALES COST OF GOODS SOLD Let’s look at an example. GROSS PROFIT

EXAMPLE During the month, 20 hats are sold for $10 each. The hats were originally purchased for $7. 50 each. NET SALES COST OF GOODS SOLD GROSS PROFIT $200 20 hats @ $10 each = $200 in Sales There were no Sales Returns & Allowances or Sales Discounts, so NET SALES = $200.

EXAMPLE During the month, 20 hats are sold for $10 each. The hats were originally purchased for $7. 50 each. NET SALES COST OF GOODS SOLD $200 $150 20 hats @ $7. 50 each = $150 GROSS PROFIT

EXAMPLE During the month, 20 hats are sold for $10 each. The hats were originally purchased for $7. 50 each. NET SALES COST OF GOODS SOLD GROSS PROFIT $200 $150 $50 The Gross Profit on these 20 hats was $50. This $50 is used to cover expenses.

COMPUTATION OF GROSS PROFIT

NORTHERN MICRO Sales $200, 500 1, 200 Sales Returns & Allowances Purchases 105, 000 Let’s compute 800 Purchases Returns & Allowances the Gross Profit. Purchases Discounts 1, 000 Freight-In 300 26, 000 Merchandise Inventory, 1/1/-Merchandise Inventory, 12/31/-- 18, 000

COMPUTATION OF GROSS PROFIT STEP #1: COMPUTE NET SALES. FORMULA: SALES RETURNS & ALLOWANCES

Sales Less: Sales returns & allow Net Sales $200, 500 $1, 200 This is the price we charged our customers for the merchandise. $199, 300

COMPUTATION OF GROSS PROFIT STEP #2: COMPUTE GOODS AVAILABLE FOR SALE. FORMULA: BEGINNING INVENTORY + COST OF GOODS PURCHASED

Sales Less: Sales returns & allow. Net Sales Cost of Goods Sold: Merchandise Inv. , Jan 1 Purchases Less: Purch. ret. & allow. Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale $200, 500 $1, 200 $199, 300 $26, 000 $105, 000 $ 800 1, 000 1, 800 $103, 200 300 103, 500 $129, 500 This is the cost of ALL the goods that were offered for sale.

COMPUTATION OF GROSS PROFIT STEP #3: COMPUTE COST OF GOODS SOLD. FORMULA: GOODS AVAILABLE FOR SALE ENDING INVENTORY

Sales Less: Sales returns & allow. Net Sales Cost of Goods Sold: Merchandise Inv. , Jan 1 Purchases Less: Purchases ret. & allow. Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale Less Merch. Inv, Dec. 31 $200, 500 $1, 200 $199, 300 $26, 000 $105, 000 $ 800 1, 000 1, 800 $103, 200 300 103, 500 $129, 500 18, 000 Out of the $129, 500 of merchandise available to sell, $18, 000 was not sold.

Sales Less: Sales returns & allow. Net Sales Cost of Goods Sold: Merchandise Inv. , Jan 1 Purchases Less: Purchases ret. & allow. Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale Less Merch. Inv. , Dec. 31 Cost of Goods Sold $200, 500 $1, 200 $199, 300 $26, 000 $105, 000 $ 800 1, 000 1, 800 $103, 200 300 103, 500 $129, 500 18, 000 From that we can determine that $111, 500 of merchandise was sold. 111, 500

COMPUTATION OF GROSS PROFIT STEP #4: COMPUTE GROSS PROFIT. FORMULA: NET SALES COST OF GOODS SOLD

Sales Less: Sales returns & allow. Net Sales Cost of Goods Sold: Merchandise Inv. , Jan 1 Purchases Less: Purchases ret. & allow. Purchases discounts Net purchases Add freight-in Cost of goods purchased Goods available for sale Less Merch. Inv. , Dec. 31 Cost of Goods Sold Gross Profit $200, 500 $1, 200 $199, 300 $26, 000 $105, 000 $ 800 1, 000 1, 800 $103, 200 300 103, 500 $129, 500 18, 000 The merchandise was sold for $87, 800 more than its cost. 111, 500 87, 800

PURCHASES JOURNAL Ø Purchases of MERCHANDISE for resale Ø Only ON ACCOUNT o Cash purchases would be recorded in the Cash Payments Journal. Ø Single column format o Purchases Debit/Accounts Payable Credit, OR Ø Three column o Purchases Debit, Freight-In Debit, Accounts Payable Credit

PURCHASES JOURNAL Page 8 Purchases Debit/ Date Invoice From Whom Purchased PR Accounts Payable Credit No. 1 2 3 4 5 6 7 8 9 10 11 For our example, we will use a single column Purchases Journal.

PURCHASES JOURNAL Page 8 Purchases Debit/ Date Invoice From Whom Purchased PR Accounts Payable Credit No. 1 20 -3, 300 Apr 4 631 Compucraft, Inc. 2 3 4 5 6 7 8 9 10 11 Example: On April 4 th, purchased merchandise from Compucraft, Inc. $3, 300 Invoice no. 631, dated April 2, n/30.

PURCHASES JOURNAL Page 8 Purchases Debit/ Date Invoice From Whom Purchased PR Accounts Payable Credit No. 1 20 -3, 300 Apr 4 631 Compucraft, Inc. 2 2, 500 8 927 D Datasoft 3 8, 700 11 804 EZX Corp. 4 17 611 Printpro Corp. 800 5 23 1465 Televax, Inc. 6 7 8 9 10 11 All purchases transactions are journalized in the same manner. 5, 300

PURCHASES JOURNAL Page 8 Purchases Debit/ Date Invoice From Whom Purchased PR Accounts Payable Credit No. 1 20 -3, 300 Apr 4 631 Compucraft, Inc. 2 2, 500 8 927 D Datasoft 3 8, 700 11 804 EZX Corp. 4 17 611 Printpro Corp. 800 5 23 1465 Televax, Inc. 6 7 8 9 10 11 5, 300 20, 600 At the end of the month, the column is totaled, ruled, and posted to the General Ledger accounts.

FOUR-COLUMN ACCOUNT Account: PURCHASES DATE ITEM 20 -Apr. 1 Balance 30 PR DR. Account No. 501 BALANCE CR. DR. CR. ( /) 17, 400 P 8 20, 600 38, 000 “P” for Purchases Journal

PURCHASES JOURNAL Page 8 Purchases Debit/ Date Invoice From Whom Purchased PR Accounts Payable Credit No. 1 20 -( /) 3, 300 Apr 4 631 Compucraft, Inc. 2 2, 500 8 927 D Datasoft 3 8, 700 11 804 EZX Corp. 4 17 611 Printpro Corp. 800 5 23 1465 Televax, Inc. 5, 300 6 20, 600 7 (501) (202) 8 9 10 11 A check mark is placed in the PR column when posting is completed.

PURCHASES JOURNAL Page 8 Purchases Debit/ Date Invoice From Whom Purchased PR Accounts Payable Credit No. 1 20 -( /) 3, 300 Apr 4 631 Compucraft, Inc. 2 ( /) 2, 500 8 927 D Datasoft 3 8, 700 11 804 EZX Corp. ( /) 4 ( /) 17 611 Printpro Corp. 800 5 23 1465 Televax, Inc. ( /) 5, 300 6 20, 600 7 (501) (202) 8 9 10 11 The remaining transactions are posted in the same manner.

GENERAL JOURNAL 1 2 3 4 DATE DESCRIPTION May 4 Accts. Payable/Televax PR DEBIT CREDIT 200 00 Purchases Ret. & Allow. Returned Merchandise 5 6 7 8 9 10 11 Now let’s look at the posting for a Purchase Return entry. 200 00

GENERAL JOURNAL 1 2 3 4 5 6 7 8 9 10 11 DATE DESCRIPTION May 4 Accts. Payable/Televax PR DEBIT CREDIT 202 /( /) 200 00 Purchases Ret. & Allow. Returned Merchandise - The $200 debit is posted to the Accounts Payable controlling account and to the Subsidiary ledger account for Televax. 200 00

GENERAL JOURNAL 1 2 3 4 5 6 7 8 9 10 11 DATE DESCRIPTION May 4 Accts. Payable/Televax PR DEBIT CREDIT 202 /( /) 200 00 Purchases Ret. & Allow. 501. 1 Returned Merchandise - Purchases Returns and Allowances is posted in the normal manner. Its account number is recorded in the PR column. 200 00

CASH PAYMENTS JOURNAL Ø Used to record only cash payments transactions Ø Every transaction in the journal will involve a credit to the Cash account. Ø Columns are set up in the journal for the most commonly affected accounts in cash payments transactions.

CASH PAYMENTS JOURNAL Date Check No. Account Debited PR Page 12 General Debit 1 2 3 4 5 6 7 8 9 10 11 Example: Payment of rent, $2, 400 on April 2

CASH PAYMENTS JOURNAL Date Check No. Account Debited PR 1 20 -Apr. 2 307 2 3 4 5 6 7 8 9 10 11 All cash payments (except those from Petty Cash) should be made by check for good internal control. Page 12 General Debit

CASH PAYMENTS JOURNAL Date Check No. 1 20 -Apr. 2 307 2 3 4 5 6 7 8 9 10 11 Account Debited PR Rent Expense This column is used for two purposes: 1. To identify a supplier name for any payment on account 2. To enter the appropriate account name whenever the “General Debit” column is used Page 12 General Debit 2, 400

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 6 7 8 9 10 11 2, 400 Accts. Pay. Debit Purchases Debit Purch. Disc. Credit Page 12 Cash Credit 2, 400

CASH PAYMENTS JOURNAL Date Check No. 1 20 -Apr. 2 307 2 4 308 3 4 5 6 7 8 9 10 11 Account Debited Rent Expense PR Page 12 General Debit 2, 400 Example: On April 4 $1, 400 of merchandise was purchased for cash.

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 6 7 8 9 10 11 Accts. Pay. Debit Purchases Debit 2, 400 Purch. Disc. Credit Page 12 Cash Credit 2, 400 1, 400

CASH PAYMENTS JOURNAL Date Check No. 1 20 -Apr. 2 307 2 4 308 3 10 309 4 Account Debited PR Rent Expense B. B. Small 5 6 7 8 9 10 11 Example: On April 10 payment was made on account, $4, 800. Page 12 General Debit 2, 400

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 6 7 8 9 10 11 Accts. Pay. Debit Purchases Debit 2, 400 Purch. Disc. Credit Page 12 Cash Credit 2, 400 1, 400 4, 800

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. Account Debited 307 Rent Expense 308 309 310 B. B. Small PR Notes Payable 5 6 7 8 9 10 11 Example: On April 14 payment was made on a note payable, $2, 000. Page 12 General Debit 2, 400 2, 000

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 6 7 8 9 10 11 Accts. Pay. Debit Purchases Debit 2, 400 1, 400 4, 800 2, 000 Purch. Disc. Credit Page 12 Cash Credit 1, 400 4, 800 2, 000

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 5 Check No. 307 308 309 310 22 311 Account Debited PR Rent Expense 8 9 10 11 2, 400 B. B. Small Notes Payable Gary L. Fishel, Drawing 6 7 Page 12 General Debit Example: On April 22 owner withdrew cash for personal use, $1, 600. 2, 000 1, 600

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 6 7 8 9 10 11 Accts. Pay. Debit Purchases Debit 2, 400 1, 400 4, 800 2, 000 1, 600 Purch. Disc. Credit Page 12 Cash Credit 1, 400 4, 800 2, 000 1, 600

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. 307 5 308 309 310 22 311 6 24 312 Account Debited PR Rent Expense 10 11 2, 400 B. B. Small Notes Payable Gary L. Fishel, Drawing EZX Corp. 7 8 9 Page 12 General Debit Example: On April 24 made payment on account within the discount period. 2, 000 1, 600

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 6 7 8 9 10 11 Accts. Pay. Debit Purchases Debit Purch. Disc. Credit 2, 400 Page 12 Cash Credit 2, 400 1, 400 4, 800 2, 000 1, 600 8, 700 87 8, 613

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. 307 5 308 309 310 22 311 6 24 312 Account Debited PR Rent Expense 10 11 2, 400 B. B. Small Notes Payable Gary L. Fishel, Drawing EZX Corp. 7 8 9 Page 12 General Debit On a daily basis, the amounts in the “General Debit” column are posted. 2, 000 1, 600

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. 307 5 308 309 310 22 311 6 24 312 7 8 9 10 11 Account Debited Rent Expense PR Page 12 General Debit 521 2, 400 201 312 2, 000 1, 600 B. B. Small Notes Payable Gary L. Fishel, Drawing EZX Corp. “CP” for Cash Payments journal is entered in the ledger account’s PR column, and the account number is entered in the journal’s PR column.

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. 307 5 308 309 310 22 311 6 24 312 Account Debited Rent Expense PR Page 12 General Debit 521 2, 400 201 312 2, 000 1, 600 B. B. Small Notes Payable Gary L. Fishel, Drawing EZX Corp. 7 8 9 10 11 6, 000 At the end of the month, the columns are totaled, equality of debits and credits is verified, and totals are posted to the General Ledger.

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 Accts. Pay. Debit Purchases Debit 2, 400 1, 400 4, 800 2, 000 1, 600 6 2, 000 1, 600 8, 700 7 6, 000 8 9 6, 000 + 13, 500 + 1, 400 10 11 Purch. Disc. Credit Page 12 Cash Credit = 13, 500 20, 900 1, 400 87 8, 613 87 20, 813 87 + = 20, 813 20, 900

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 Purchases Debit Purch. Disc. Credit 2, 400 1, 400 4, 800 2, 000 1, 600 6 2, 000 1, 600 8, 700 7 6, 000 8 9 ( /) 10 11 Accts. Pay. Debit Page 12 Cash Credit 13, 500 1, 400 87 8, 613 87 20, 813 Check mark indicates the column should not be posted.

CASH PAYMENTS JOURNAL General Debit 1 2 3 4 5 Accts. Pay. Debit Purchases Debit 2, 400 1, 400 4, 800 2, 000 1, 600 6 2, 000 1, 600 8, 700 7 6, 000 13, 500 1, 400 8 9 ( /) (202) (501) 10 11 Purch. Disc. Credit Page 12 Cash Credit Account numbers indicate the totals were posted. 87 8, 613 87 20, 813 (501. 2) (101)

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. 307 5 308 309 310 22 311 6 24 312 Account Debited Rent Expense PR Page 12 General Debit 521 2, 400 201 312 2, 000 1, 600 B. B. Small Notes Payable Gary L. Fishel, Drawing EZX Corp. 7 8 9 10 11 6, 000 Transactions affecting the Accounts Payable ledger are posted daily.

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. 307 5 308 309 310 22 311 6 24 312 PR Page 12 General Debit Rent Expense 521 2, 400 B. B. Small ( /) Notes Payable 201 312 Account Debited Gary L. Fishel, Drawing EZX Corp. ( /) 7 8 9 10 11 2, 000 1, 600 6, 000 Check mark is entered to indicate the transaction has been posted.

CASH PAYMENTS JOURNAL Date 1 20 -Apr. 2 2 4 3 10 4 14 Check No. 307 5 308 309 310 22 311 6 24 312 PR Page 12 General Debit Rent Expense 521 2, 400 B. B. Small ( /) Account Debited Notes Payable Gary L. Fishel, Drawing EZX Corp. 201 312 ( /) 7 8 9 10 11 2, 000 1, 600 6, 000 Check mark is also entered for transactions that do not require individual postings.

ACCOUNTS PAYABLE LEDGER Ø A separate “subsidiary” ledger Ø Individual accounts for each supplier Ø Often numbered Ø Filed either alphabetically or numerically Ø Accounts Payable account in the general ledger is the “controlling account”

SCHEDULE OF ACCOUNTS PAYABLE Ø Prepared to verify that the sum of the accounts payable ledger balances equals the Accounts Payable balance Ø Listing of suppliers and their balances Ø Usually prepared at the end of the month Ø Total of the balances listed is compared with the balance in the Accounts Payable account

Northern Micro Schedule of Accounts Payable April 30, 20 -Compucraft, Inc. Datasoft Printpro Corp. Televax, Inc. $3, 300 2, 500 800 5, 300 $11, 900 This should be the balance in the Accounts Payable controlling account.