accounting 3 chapter 18 section 1. vocabulary corporation- an organization with the legal rights of...
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Accounting 3Accounting 3
Chapter 18Chapter 18
Section 1Section 1
VocabularyVocabulary
Corporation- An organization with the legal Corporation- An organization with the legal rights of a person and which may be rights of a person and which may be owned by many persons.owned by many persons.
Share of Stock- Each unit of ownership in Share of Stock- Each unit of ownership in a corporation.a corporation.
Capital Stock- Total shares of ownership Capital Stock- Total shares of ownership in a corporation.in a corporation.
Special Journal- A journal used to record Special Journal- A journal used to record only one kind of transaction.only one kind of transaction.
Differences Between OwnershipsDifferences Between Ownerships
The main difference among the accounting The main difference among the accounting records of proprietorships, partnerships, records of proprietorships, partnerships, and corporations is in the capital accounts.and corporations is in the capital accounts.
Proprietorships and partnerships have a Proprietorships and partnerships have a single capital and drawing account for single capital and drawing account for each owner.each owner.
Corporations have separate capital Corporations have separate capital accounts for the stock issued and the accounts for the stock issued and the earnings kept in the business.earnings kept in the business.
Special JournalsSpecial Journals
A General Journal is used in a corporation.A General Journal is used in a corporation.Four types of special journals are used in Four types of special journals are used in
corporations:corporations:Purchases (discussed in this section)Purchases (discussed in this section)Cash PaymentsCash PaymentsSalesSalesCash ReceiptsCash Receipts
Purchases JournalPurchases Journal
This journal is used This journal is used onlyonly to record to record purchases of merchandise on accountpurchases of merchandise on account..
A purchase on account can be recorded A purchase on account can be recorded on one line.on one line.
There is only one special amount column.There is only one special amount column.Each entry in this column is both a Each entry in this column is both a debitdebit
to to PurchasesPurchases and a and a creditcredit to to Accounts Accounts PayablePayable. . (This is just combining the same two columns from (This is just combining the same two columns from the expanded journal used in Accounting 2.)the expanded journal used in Accounting 2.)
Purchases JournalPurchases Journal
Instead of a Doc. No. column, a Purch. No. Instead of a Doc. No. column, a Purch. No. column is used. This is due to purchase invoices column is used. This is due to purchase invoices as the only source document in this journal.as the only source document in this journal.
Instead of an Account Title column, an Account Instead of an Account Title column, an Account Credited column is used. This is done because Credited column is used. This is done because you must specify which company the you must specify which company the merchandise was purchased from and credit that merchandise was purchased from and credit that account in the accounts payable ledger.account in the accounts payable ledger.
Example of Purchases JournalExample of Purchases JournalPurchases Journal Page ___
Date Account CreditedPurch.
No.
Post
Ref.
Purchases Dr.
Acct Pay Cr.
Journalizing Purchases on AccountJournalizing Purchases on Account
Example TransactionExample Transaction: March 2. Purchased merchandise : March 2. Purchased merchandise on account from Pro Golf Company, $7,254.00. on account from Pro Golf Company, $7,254.00. Purchase Invoice No. 179.Purchase Invoice No. 179.
Accounts Effected:Accounts Effected:
Visual steps for completion on next slide. Visual steps for completion on next slide.
General Ledger
Purchases
7,254.00
Accounts Payable
7,254.00
Accounts Payable Ledger
Pro Golf Company
7,254.00
Journalizing Purchases on AccountJournalizing Purchases on AccountPurchases Journal Page ___
Date Account CreditedPurch.
No.
Post
Ref.
Purchases Dr.
Acct Pay Cr.
Mar 2 Pro Golf Company 179
3
7 2 4 5 00
Posting from Purchases Journal to Posting from Purchases Journal to Accounts Payable LedgerAccounts Payable Ledger
The amount on each line of a purchases journal The amount on each line of a purchases journal is posted as a is posted as a creditcredit to the to the vendor accountvendor account in the in the accounts payable ledgeraccounts payable ledger..
The posting reference used for the purchases The posting reference used for the purchases journal is journal is PP along with the page number of the along with the page number of the transaction. (transaction. (P3 for this oneP3 for this one))
Once posting is done, posting references must Once posting is done, posting references must be entered on the purchases journal pagebe entered on the purchases journal page..
Visual steps on next slide.Visual steps on next slide.
Posting from a Purchases Journal Posting from a Purchases Journal to an Accounts Payable Ledgerto an Accounts Payable Ledger
Account Acct No.
Date ItemPost
RefDebit Credit
Credit
Balance
Pro Golf Company 260
Mar
2 P3
3 6 8 1 001 Balance
10 9 2 6 007 2 5 4 00
Posting from Purchases Journal to Posting from Purchases Journal to a General Ledgera General Ledger
At the At the end of the fiscal periodend of the fiscal period, the , the purchases journal must be purchases journal must be ruledruled and and totaledtotaled..
Once this is done, the total must be Once this is done, the total must be postedposted in the in the General LedgerGeneral Ledger in in bothboth the the PurchasesPurchases and and Accounts PayableAccounts Payable accounts.accounts.
Visual steps on next two slides.Visual steps on next two slides.
Purchases Journal Page ___
Date Account CreditedPurch.
No.
Post
Ref.
Purchases Dr.
Acct Pay Cr.
Mar 2 Pro Golf Company 179 7 2 5 4 00
3
31 Raffo Company 180
260
270 3 7 1 0 00
31 Total 10 9 6 4 00
(5105) (2115)
*These should be entered after totals have been posted into the general ledger.
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
Accounts Payable 2115
Purchases 5105
Mar
29 G4 1 2 0 00 24 0 0 7 00
31 P3 10 9 6 4 00 34 9 7 1 00
1 Balance 23 8 8 7 00
Mar 1 Balances 72 3 7 4 00
16 CP6 2 4 0 00 72 6 1 4 00
31 P3 10 9 6 4 00 83 5 7 8 00
Work Together p. 459Work Together p. 459Purchases Journal Page ___
Date Account CreditedPurch.
No.
Post
Ref.
Purchases Dr.
Acct Pay Cr.
4
Apr 2 Farris, Inc. 45 1 7 0 0 00 Post
5 Delta Manufacturing 46 3 2 6 5 00 Post
8 Williams Company 47 7 8 0 00 Post
30 Total
220
210
230
*These should be entered after the credit to vendor account has been posted.
5 7 4 5 00 Post
(2115) (5105)
*These should be entered after the totals have been posted.
Assignment
Look at postings after each step is complete and use the back button to get to the next step. Once finished, this is the end of section 1.
Account Acct No.
Date ItemPost
RefDebit Credit
Credit
Balance
Delta Manufacturing 210
Apr 1 Balance 2 2 4 5 00
5 P4 3 2 6 5 00 5 5 1 0 00
Account Acct No.
Date ItemPost
RefDebit Credit
Credit
Balance
Farris, Inc. 220
Apr 1 Balance 1 2 5 7 00
2 P4 1 7 0 0 00 2 9 5 7 00
Account Acct No.
Date ItemPost
RefDebit Credit
Credit
Balance
Williams Company 230
Apr 8 P4 7 8 0 00 7 8 0 00
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
Accounts Payable 2115
Apr 1 Balance 8 7 6 0 00
30 P4 5 7 4 5 00 14 5 0 5 00
Purchases 5105
Apr 1 Balance 18 7 8 1 00
30 P4 5 7 4 5 00 24 5 2 6 00
AssignmentAssignment
Do Application 18-1 on page 477 by hand.Do Application 18-1 on page 477 by hand.Turn it in to Mrs. Middleton.Turn it in to Mrs. Middleton.Move on to section 18-2.Move on to section 18-2.