Accounting Fundamentals: Journals

Transcription

1 Directions: Fill in the blanks. 1. Journals Are a form for recording transactions in chronological order journal entries include the transaction amounts, which accounts are affected and how the accounts are affected (debit/credit) Journalizing: the act of recording transactions in a journal 2. Types of Journals Include: general journal contains a variety of transactions special journals groups specific types of journal entries together improves organization and efficiency Items which do not fit in special journals go directly to the general journal. 3. Types of Journal Entries Include: simple journal entry one debit and one credit compound journal entry more than two accounts are affected Both types of entries may include the transaction date and a brief description of the transaction. 4. Merchandising Businesses Sell directly to consumers and businesses Receive their primary revenue from sales Retailers: sell goods directly to customers Wholesalers: sell goods mainly to retailers Accompanies: 1

2 5. Special Journals in a Merchandising Business Include: sales journal contains the sales of merchandise through credit (on account) cash receipts journal contains all cash received and cash sales purchases journal contains company merchandise purchased on account cash payments journal contains cash paid and cash purchases 6. Sales Journals Include the following columns: date invoice number customer name accounts receivable amount debited/sales amount credited this is found in one column because all transactions will use the same accounts 7. Sales Journal Example 8. Cash Receipts Journal Includes transactions which increase cash such as cash sale of merchandise or collection of accounts receivable many types of transactions increase cash, so multiple columns are used for debits and credits Accompanies: 2

3 9. Cash Receipts Journal Include the following columns: cash (debit) sales discounts (debit) accounts receivable (credit) sales (credit) other (not cash or collection of receivables) (credit) Debit Cost of Good Sold and Credit Merchandise Inventory may be separate columns for businesses using a perpetual inventory system. 10. Cash Receipts Journal Example 11. Purchases Journal Include the following columns: entry date name of supplier credit terms explains when payment is due for credit purchases debit merchandise inventory/credit accounts payable companies may add more debit/credit columns if they make many non-merchandise purchases 12. Purchases Journal Example Accompanies: 3

4 13. Cash Payments Journal Contains transactions which decrease cash Includes the following columns: date account name accounts payable (debit) other (debit) accounts affected by cash (ex. salary expense, rent expense) purchase discount (credit) cash (credit) 14. Cash Payments Journal Example 15. Journalizing Methods Include: special journal entries are sent to the appropriate subsidiary ledgers daily to help maintain accuracy total amounts from subsidiary ledgers are usually sent to general ledgers monthly Special Journals contain information about several similar transactions. It is important to know how to journalize individual transactions in a merchandising business before they are added to special journals. Accompanies: 4

5 16. Journal Entry Example: Sale of Merchandise on Account These are simple journal entries (1 debit; 1 credit) The company has to make profit, so the item was sold for more than its original purchase price; the following is the additional journal entry which involves the product s original price 17. Journal Entry: Cash Receipt Collection of Accounts Receivable Cash Sale of Merchandise 18. Journal Entry: Company Merchandise Purchases on Account Carbon Co. bought $12,000 worth of merchandise from Young Wholesaler on account; these items will be used for resale Accompanies: 5

6 19. Journal Entry: Cash Paid (Cash Purchase) Carbon Co. paid off their $12,000 worth of merchandise bought on credit 20. General Journal Entries Can occur due to: sales returns customers give merchandise back to the business for credit or cash refund sales allowance business grants a deduction in the selling price of an item; the customer keeps the item sales discount reduction in price in exchange for early payment by a buyer (used for items sold on discount) Sales returns and allowances are usually combined into one account. 21. Journal Entry: Sales Return & Allowance Rob returned a book purchased from Libro Co. for $45 The purchaser may return the merchandise or choose to keep the merchandise if the supplier is willing to grant an allowance (deduction) from the purchase price; when merchandise is returned, inventory is credited Accompanies: 6

7 22. Journal Entry: Sales Discount Libro Co. sold $500 worth of merchandise to Cameron Edwards on account; he will receive a two percent discount if he pays within 10 days instead of 30 days Purchase on account entry: 23. Journal Entry: Sales Discount Journal entry after paying on the fifth day the new payment is the sales discount subtracted from the original amount which was paid on credit this is an example of a compound journal entry (two debits; one credit) 24. Journal Entry: Service Business Example Hedgeco Lawn Care received $800 in cash for lawn care services Cash increases the company assets (debit) Service revenue increases company revenue (credit) Accompanies: 7

8 25. Journal Entry: Service Business Example A company paid a total of $25,000 in salaries The cash account will decrease (credit) when salaries are paid Accompanies: 8