Accounting I. Lesson Plan. Name: Terry Wilhelmi Day/Date: Topic: Journalizing Purchases and Cash Payments Unit: 3 Chapter 11

Size: px

Start display at page:

Download "Accounting I. Lesson Plan. Name: Terry Wilhelmi Day/Date: Topic: Journalizing Purchases and Cash Payments Unit: 3 Chapter 11"

Elfrieda Gardner
5 years ago
Views:

1 Accounting I Lesson Plan Name: Terry Wilhelmi Day/Date: Topic: Journalizing Purchases and Payments Unit: 3 Chapter 11 I. Objective(s): By the end of today s lesson, the student will be able to: define accounting terms related to purchases and cash payments for a merchandising business. identify accounting concepts and practices related to purchases and cash payments for a merchandising business. analyze purchases and cash payments transactions for a merchandising business. journalize purchases and cash payments transactions for a merchandising business. II. Materials: Textbook Workbook Transparencies III. Anticipatory Set: Many businesses require the skills and capital of more than one person. Therefore, many businesses are owned by two or more persons. IV. Learning Activities:

2 2 Partnership - a business in which two or more persons combine their assets and skills. Partner - each member of a partnership. Partners must agree on how each partner will share the business profit and loss. The business is kept separate from each partner s personal affairs. Merchandising business - a business that purchases and sells goods. Merchandise - goods that a merchandising business purchases to sell. CarLand - is a merchandising business organized as a partnership and is owned by Amy Kramer and Dario Mesa. The business purchases and sells automotive supplies. They rent the building in which the business is located as well as the equipment used for operation. Chart Of Accounts - pg (Cover the differences from proprietorship) We are going to work through the complete accounting cycle for a merchandising business organized as a partnership. USING AN EXPANDED JOURNAL A merchandising business has many noncash and other frequently occurring transactions that affect single accounts. CarLand uses an 11-column journal containing special amount columns for the recording of frequently occurring transactions related to the purchasing and selling of merchandise. The columns are arranged to make accurate journalizing and posting easier. Illustration 11-1, page 247.

3 3 JOURNALIZING PURCHASES OF MERCHANDISE Cost of merchandise - the price a business pays for goods it purchases to sell. Markup - the amount added to the cost of merchandise to establish the selling price. The selling price of merchandise must be greater than the cost of merchandise for a business to pay its expenses and also make a profit. Revenue earned from the sale of merchandise includes both the cost of merchandise and the markup. Only the markup increases capital. Vendor - a business from which merchandise is purchased or supplies or other assets are bought. A merchandising business also buys supplies and other assets for use in the business. Purchases - the account used for recording the cost of merchandise purchased to sell. Classified as a cost account because it is in the cost of merchandise division in the chart of accounts. Temporary account. Normal debit balance because the cost of merchandise purchased for resale reduces capital. Increased by a debit and decreased by a credit. Used to record the value of merchandise purchased in the Purchases Debit column of the journal. All other items bought, such as supplies, are recorded in the General Debit column. Merchandise and other items bought are recorded and reported at the price agreed upon at the time the transactions occur.

4 4 Historical Cost The actual amount paid for merchandise or other items bought is recorded. * the actual amount paid for an item in a business transaction is the historical cost and the amount recorded in the financial records. Purchase of merchandise for cash (Illustration 11-2, pg. 248) Purchases A check mark in the Account Title column; check number in document column; a check mark in Post Ref. column; Purchases debit; credit. A cash purchase transaction increases the purchases account balance and decreases the cash account balance. Purchase of merchandise on account (pg. 249) Purchase on account - a transaction in which the merchandise purchased is to be paid for later. Businesses that purchase on account from many vendors will have many accounts for vendors. Accounts Payable - a liability account that summarizes the amounts owed to all vendors. Normal credit balance - increased by a credit and decreased by a debit. When a vendor sells merchandise to a buyer, the vendor prepares a form showing what has been sold. Invoice a form describing the goods sold, the quantity, and the price.

5 5 Purchase invoice an invoice used as a source document for recording a purchase on account transaction. (Illustration 11-3, pg. 249) It lists the quantity, the description, the price of each item, and the total amount of the invoice; which provides the information needed for recording a purchase on account. When a purchase invoice is received, the date and a number are stamped in the upper right-hand corner. The date is the date the invoice was received and the number is the number assigned by the business to the invoice. A business (CarLand) needs to know that all items ordered have been received and that the prices are correct. a check mark is placed by each item on the invoice when they are received to indicate that they have been accounted for. initials near the total are those of the person at the business (CarLand) who checked the invoice. Terms of sale - an agreement between a buyer and a seller about payment for merchandise. 30 days - payment is due within 30 days of the date of the invoice. Transaction (Illustration 11-4, pg. 250) Purchases Accounts Payable A purchase on account increases the amount owed to a vendor. The transaction increases the purchases account balance and increases the accounts payable account balance. The business to whom the merchandise was purchased goes in the Account Title column; purchase invoice number in document column; Purchases debit; Accounts Payable credit.

6 6 JOURNALIZING BUYING SUPPLIES Supplies are not intended for sale but are bought to be used in the operation of a business. Buying supplies for cash (pg. 251) Supplies - Office (Illustration 11-5, pg. 252) Buying supplies on account (pg. 252) An invoice is received from the vendor and a memorandum is attached to it to indicate that the invoice is for supplies and not for purchases. The source document then is the memorandum. (Illustration 11-6, pg. 252) Supplies - Store Accounts Payable (Illustration 11-7, pg. 253) Vendor name in the Account Title column; memo number in document column; Supplies - Store debit; Accounts Payable credit. Assignment: Be sure you know and understand: terms 1-11, pg questions 1-16, pgs answer Case 2, pg Drill 11-D2, transactions 1-7, pg do Problem 11-1, transactions for Sept. 1-7, pgs read pages

7 7 JOURNALIZING CASH PAYMENTS Most of CarLand s cash payments are to vendors or for expenses. Payments to vendors is made according to the terms of sale on the purchase invoices. Payment for an expense is usually made at the time the expense occurs. payment on account (pg. 253) payment on account decreases the amount owed to the vendors. Accounts Payable Vendor name in the Account Title column; check number in document column; Accounts Payable debit; credit. (Illustration 11-8, pg. 254) payment of an expense (pg. 254) Advertising Expense (Illustration 11-9, pg. 255) payment to replenish petty cash (pg. 255) Supplies - Office (Illustration 11-10, pg. 256) Supplies - Store Advertising Expense Misc. Expense The account Petty is used only when establishing the petty cash account.

8 8 JOURNALIZING OTHER TRANSACTIONS Withdrawals by partners The two assets generally taken out of a merchandising business are cash and merchandise. withdrawal (pg. 256) Drawing (Illustration 11-11, pg. 257) Merchandise withdrawal (pg. 257) The source document for a withdrawal of merchandise is the memorandum prepared by the partner withdrawing the merchandise. The withdrawal decreases the purchases account balance. Drawing (Illustration 11-12, pg. 257) Purchases Correcting entry (pg. 258) Errors may be made even though care is taken in recording transactions. A transaction may have been improperly journalized and posted to the ledger. When an error in a journal entry has already been posted, the incorrect journal entry should be corrected with an additional journal entry. Correcting entry - a journal entry made to correct an error in the ledger. If an accounting error is discovered, a memorandum is prepared describing the correction to be made; and then becomes the source document for the entry.

9 9 Advertising Expense Misc. Expense (Illustration 11-14, pg. 259) Summary of Journalizing Purchases, Payments, and Other Transactions Page 260 Assignment: Be sure you know and understand: accounting term 12, pg questions 17-20, pg Drill 11-D2, transactions 8-16, pg Professional business Ethics, pg. 254 Problem 11-1, transactions for Sept. 8-20, pg. 269 Problem 11-M. V. Closure: To review for test do Study Guide 11 and Problem 11-M. VI. Evaluation of Student Learning: Students will be evaluated using Problem 11-M, and chapter 11 test.

Accounting 1. Lesson Plan. Topic: Distributing Dividends and Preparing a Work Sheet for a Unit: 4 Chapter 26 Corporation

Accounting 1. Lesson Plan. Topic: Distributing Dividends and Preparing a Work Sheet for a Unit: 4 Chapter 26 Corporation Accounting 1 Lesson Plan Name: Terry Wilhelmi Day/Date: Topic: Distributing Dividends and Preparing a Work Sheet for a Unit: 4 Chapter 26 Corporation I. Objective(s): By the end of today s lesson, the