merchandising business goods that a business purchases to sell are called merchandise. a business...
TRANSCRIPT
LESSON 9-1Journalizing Purchases Using a Purchases Journal
Merchandising Business
Goods that a business purchases to sell are called merchandise.
A business that purchases and sells goods is called a merchandising business.
A merchandising business that sells to those who use or consume the goods is called a retail merchandising business.
A business that buys and resells merchandise to retail businesses is called a wholesale merchandising business.
Service and merchandising businesses use many of the same accounts. A merchandising business has additional accounts on the balance sheet and income statement to account for the purchase and sale of merchandise.
Hobby Shack Janice Kellogg decided to quit her full-time job and turn her
ceramic hobby into a retail business. She developed a plan to rent space in a shopping center and operate Hobby Shack six days a week. Hobby Shack would sell a wide variety of art and hobby supplies to individuals, schools, and businesses. Janice planned to expand the merchandise she offers, rent store and office equipment, and employ other individuals to work in the store. However, Janice did not personally have the capital to implement her plan. But with the help of a small group of investors, Janice formed a corporation called Hobby Shack, Inc. Each stockholder received a number of shares of stock based on the amount invested.
Unlike a proprietorship, a corporation exists independent of its owners. Janice expects the Hobby Shack to continue beyond her lifetime and plans to give her shares of stock to her children.
Using Special Journals
A business with limited number of daily transactions may record all entries in one journal. A business with many daily transactions may choose to use a separate journal for each kind of transaction. A journal used to record only one kind of transaction is a special journal.
Hobby Shack uses five journals for their transactions: Purchases Journal-for all purchases of merchandise on
account Cash Payments Journal- for all cash payments Sales Journal- for all sales of merchandise on account Cash Receipts Journal-for all cash receipts General Journal-for all other transactions
Purchasing Merchandise
The price a business pays for goods it purchases to sell is called cost of merchandise.
The amount added to the cost of merchandise to establish the selling price is called markup.
Example: The markup cost of an iPhone is $199.00. So if a retail value is $650 for an iPhone. What would be the cost of merchandise for an iPhone?
A business from which merchandise is purchased or supplies or other assets are bought is called a vendor.
Purchasing Merchandise
The account used for recording the cost of merchandise is titled Purchases.
Classified as a cost account; cost of merchandise division of chart of accounts
Temporary account
Reduces capital when the merchandise is purchased; Purchases has a normal debit balance
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PURCHASING MERCHANDISE
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Purchases on Account
A transaction in which the merchandise purchased is to be paid for later is called a purchase on account.
LESSON 9-1 9
PURCHASES ON ACCOUNT
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Purchases Journal
A special journal used to record only purchases of merchandise on account is called a purchases journal.
The amount column has two account titles in it’s heading: Purchases Debit and Accts. Payable Credit
A journal account column headed with an account title is called a special amount column.
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PURCHASES JOURNAL
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Purchase Invoice
An invoice used as a source document for recording a purchase on account transaction is called a purchase invoice.
Name other types of source documents from Part I?
LESSON 9-1 13
PURCHASE INVOICE
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1. Stamp the date received andpurchase invoice number.
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4. Review the vendor’s terms.
5. Terms of Sale
3. Initials of the person whochecked the invoice.
2. Place a check mark by each amount.
LESSON 9-1 14
PURCHASING MERCHANDISE ON ACCOUNT
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November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83.
1. Write the date.
2. Write the vendor name.
3. Write the purchase invoice number.
4. Write the amount of the invoice.
LESSON 9-1 15
TOTALING AND RULING A PURCHASES JOURNAL
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61. Rule a single line across the amount column.
2. Write the date.
3. Write the word Total.
4. Add the amount column.
5. Write the total.
6. Rule double lines across the amount column.
LESSON 9-1 16
TERMS REVIEW
merchandise
merchandising business
retail merchandising business
wholesale merchandising business
corporation
share of stock
capital stock
stockholder
special journal
cost of merchandise
markup
vendor
purchase on account
purchases journal
special amount column
purchase invoice
terms of sale
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