chapters 10. partnership a business with two or more owners combining their assets and skills ...
TRANSCRIPT
ACCOUNTING FOR A
MERCHANT BUSINESS
Chapters 10
PARTNERSHIPS Partnership
A business with two or more owners combining their assets and skills
PartnerEach member/owner of a partnership
JOURNALIZING PURCHASES OF MERCHANDISE FOR
CASH
Lesson 10.1
OMNI IMPORTS Merchandising Business
A business that purchases and sells goods Retail Merchandising Business
A merchandising business that sells to those who use or consume the goods
MerchandiseGoods that a merchandising business
purchases to sell Wholesale Merchandising Business
A business that buys and resells merchandise to retail merchandising businesses
EXPANDED JOURNAL P.229
5-Column vs. 11-ColumnThe number of amount columns
Encore Music – 5-Column Journal
Omni Imports – 11-Column JournalNew special amount columns:
A/R, A/P, Purchases Dr., Sales Tax Payable Cr.
Special amount columnsFor accounts that are used frequentlyTo save time and space
PURCHASING MERCHANDISE P.230
Cost of Merchandise/Cost of Goods Sold (COGS)The price a business pays for goods it will sell
MarkupThe amount added to the cost of merchandise
to establish the selling price Vendor
The business which merchandise, supplies, or other assets are bought
CONCEPT: Historical CostAmount paid for merchandise or other items
bought is recorded
PURCHASES Cost account
Because it is in the cost of merchandise division of the chart of accounts
Look at Omni Imports Chart of Accounts on p. 225
Temporary Account ONLY merchandise
purchases (not supplies or any other purchase)
Purchases
CreditDebit
normal
ENTRY #1, P.231
PAYING CASH FOR MERCHANDISE
November 1Purchased
merchandise for cash, $575.00. Check No. 290.
Purchases
Cash
575.00
575.00
Complete 10-1 WT
Page 232
JOURNALIZING PURCHASES OF
MERCHANDISE ON ACCOUNT AND
BUYING SUPPLIES
Lesson 10-2
PURCHASE INVOICE P.233
Purchase InvoiceAn invoice used as a source document for
recording a purchase on account transaction
Created by the vendorOmni Imports give the invoice its own
number Terms of Sale
An agreement between a buyer and seller about payment for merchandise
Ex: 30days (payment is due within 30 days of the vendor’s date of the invoice)
ENTRY #2, P.234
PURCHASING MERCHANDISE ON ACCOUNT
November 2Purchased
merchandise on account from Crown Ltd., $2,039.00. Purchase Invoice No. 83.
Purchases
Accounts Payable
2,039.00
2,039.00
ENTRY #3, P.235
PAYING CASH FOR SUPPLIES
November 5Paid cash for
office supplies, $34.00. Check No. 292
Office Supplies are supplies used in general business operations (paper, pens, price tags, etc.)
Supplies - Office
Cash
34.00
34.00
ENTRY #4, P.236
BUYING SUPPLIES ON ACCOUNT
November 6Bought store
supplies on account from Foxfire Supply, $210.00. Memorandum No. 52
An invoice is received from the vendor when buying on account, to avoid confusion a memo is attached and used as the source document
Supplies - Store
Accounts Payable
210.00
210.00
Complete 10-2 WT
Page 237
JOURNALIZING CASH PAYMENTS AND
OTHER TRANSACTIONS
Lesson 10-3
ENTRY #5, P.238
CASH PAYMENT ON ACCOUNT
November 7Paid cash on
account to Pacific Imports, $1,050.00, covering Purchase Invoice No. 81. Check No. 294
Check no. is used as the source doc because it is our source
Accounts Payable
Cash
1,050.00
1,050.00
ENTRY #6, P.239
CASH PAYMENT OF AN EXPENSE
November 9Paid cash for
advertising, $150.00. Check No. 296.
Advertising Expense
Cash
150.00
150.00
ENTRY #7, P.240
CASH PAYMENT TO REPLENISH PETTY CASH
November 9Paid cash to
replenish the petty cash fund, $205.00: office supplies, $35.00; store supplies, $47.00; advertising, $92.00; miscellaneous, $31.00. Check No. 297
Supplies - Office
35.00
Supplies - Store47.00
Cash
205.00
Miscs Expense31.00
Advertising Expense92.00
ENTRY #8, P.241
CASH WITHDRAWALS BY PARTNERS
November 10Michelle Wu,
partner, withdrew cash for personal use, $1,200.00. Check No. 298.
Michelle Wu, Drawing
Cash
1,200.00
1,200.00
ENTRY #9, P.242
MERCHANDISE WITHDRAWALS BY PARTNERS
November 12Karl Koehn,
partner, withdrew merchandise for personal use, $300.00. Memorandum No. 53.
Karl Koehn, Drawing
Purchases
300.00
300.00
Complete 10-3 WTand 10-4 AP
Page 243 and 246
JOURNALIZING SALES AND
CASH RECEIPTSChapter 11
SALES TAX Customer
A person or business to whom merchandise or services are sold
Sales TaxA tax on a sale of
merchandise or services
Sales Tax Payable
CreditDebit
normal
Price of Goods x Sales Tax Rate = Sales Tax
$300.00 x 6% = $18.00
Price of Goods + Sales Tax = Total Amt Received
$300.00 + $18.00 = $318.00
JOURNALIZING SALES AND CASH RECEIPTS
FROM SALES
Lesson 11.1
SALE OF MERCHANDISE P.254
CONCEPT: Realization of Revenue No matter when payment is made revenue is
recorded at the time of sale Cash Sale
A sale where cash is received at the time of sale
Credit Card SaleA sale where a credit card is used at the time
of saleMajor bank approved credit cards: VISA,
MasterCard, Discover Credit card slip
Totaled and recorded at the end of each weekSource Document – Cash Register Tape
CREDIT CARD (CC) SALES P.254
1. Omni Imports creates a cc slip for each cc sale
2. All cc slips sent to bank each week with weekly deposit to Omni’s bank
3. Omni’s bank accepts the cc slips the same way it accepts cash for deposit
4. If a cc was issued by another bank, Omni’s bank sends the cc slip to the issuing bank
5. The issuing bank bills the customer and collects the amount owed
6. The bank that accepts and processes the cc slip for a business charges a fee for the service
7. The fee is included on Omni’s monthly bank statement
ENTRY #10, P.255
CASH AND CC SALES November 4
Recorded cash and credit card sales, $5,460.00, plus sales tax, $327.60; total $5,787.60. Cash Register Tape No. 4.
Cash & cc sales recorded in same deposit
Cash Register Tape is numbered based on the day of the month (T4)
The month of November started on a Wednesday – short week of sales
Cash
Sales Tax Payable
5,787.60
327.60
Sales
5,460.00
SALES INVOICE P. 256
Sale on accountA sale where cash is received later
InvoicePrepared when merchandise is sold on
accountDescribes the goods, quantity, and priceSales Invoice - Source document for
recording a sale on account (CONCEPT: Objective Evidence) A.k.a. – sales ticket, sales slip
3 copies: Customer, Shipping Dept., Accounting
Dept.
ENTRY #11, P.257
SALE ON ACCOUNT November 3
Sold merchandise on account to Children’s paradise, $816.00, plus sales tax, $48.96; total, $864.96. Sales Invoice No. 76.
Even though cash is not received yet we still record the sale (CONCEPT: Realization of Revenue)
Accounts Receivable
Sales Tax Payable
864.96
48.96
Sales
816.00
ENTRY #12, P.258
CASH RECEIPTS ON ACCOUNT November 6
Received cash on account from Fiesta Costumes, $2,162.40, covering $69. Receipt No. 90.
Omni prepares a receipt whenever cash is received and uses it as the source document
2 copies: customer, accounting dept.
Cash
2,162.40
Accounts Receivable
2,162.40
Complete 11-1 WT
Page 259
PROVING AND RULING AN
EXPANDED JOURNAL
Lesson 11.2
CARRYING TOTALS FORWARD P.254
Prove a Journal1. Rule single line above last line of all amount
columns2. Date3. Write “Carried Forward” in the account title
column4. Check mark in “Post. Ref.” column5. Total all amount columns below single underline6. Verify that the Debits = Credits using the
form on page 2607. Double underline below all totals in the amount
columns Account totals are verified as correct
STARTING A NEW JOURNAL PAGE P. 262
Bring amounts forward to next Journal page1. Write the new Journal page number on
both pages of journal (expanded journal goes on two pages)
2. Date (same as last line of previous page)3. Write “Brought Forward” in the account
title column4. Check mark in “Post. Ref.” column5. Bring all totals forward from previous
journal page
PROVING AND RULING A JOURNAL AT THE END OF THE MONTH P. 264
Prove the Journal page at the end of the month1. Single underline2. “Totals” written in account title column3. Total all amount columns4. Verify that the Debits = Credits using the
form on page 2605. Double underline below totals
PROVING AND RULING A JOURNAL AT THE END OF THE MONTH P. 264
Prove cash at the end of the monthUsing the form on page 264:
1. Add all cash received during the month (Cash debit column) to the previous cash balance and subtotal
2. Subtract all cash spend during the month (Cash credit column) to the subtotal and total
3. Match this amount with the amount on your last unused check stub
Cash balance on your Journal MUST agree with the cash balance on your last unused check stub
Complete 11-2 WTand 11-3 AP
Page 266