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Chapter 6. Purchases and Purchases Journal 采购和采购日记账. Now, let ’ s talk about purchase!. Purchase Accounts. Asset. Liability. O’E. Revenue. Expense. +. +. -. =. Merchandize Inventory. purchase. Sales. Sales tax payable. +. +. -. -. +. -. +. -. Sales R&A. Purchase R&A.

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Presentation Transcript
slide1

Chapter 6

Purchases and Purchases Journal

采购和采购日记账

slide3

Purchase Accounts

Asset

Liability

O’E

Revenue

Expense

+

+

-

=

Merchandize

Inventory

purchase

Sales

Sales tax payable

+

+

-

-

+

-

+

-

Sales R&A

Purchase R&A

+

-

-

+

slide4

Purchase procedures and control

Department

Purchase

requisition

Payment

Purchase

order

Accounting

Dept

Supplier

Purchase Dept

Delivery

Invoice

Receiving Dept

record

Receiving

report

verification

slide5

Purchases Journal

  • Record the purchases of merchandise on account only.
  • What is the difference between the sales journal and purchases journal?
  • What is the similarity?
cash discount purchases discount sales discount

Exh.

6-7

Cash Discount/Purchases Discount/Sales Discount

A deduction from the invoice price granted to induce early payment of the amount due.

Terms

Time

Due

Discount Period

Credit Period

Full amount

less discount

Full amount due

Purchase or Sale

credit terms and cash discount
Credit Terms and Cash Discount信贷/信用条件 现金折扣

When manufacturers and wholesalers sell their products on account, the credit terms are stated in the invoice.

2/10, n/30

Read as: “Two ten, net thirty”

credit terms and cash discount1
Credit Terms and Cash Discount

2/10, n/30

Percentage of Discount

# of Days Discount Is Available

Otherwise, the Full Amount Is Due

# of Days when Full Amount Is Due

trade discount
Used by manufacturers and wholesalers to change selling prices without republishing their catalogs.Trade Discount

Example

Jen Co, Inc. offers a 30% trade

discount on orders of 1,000

units or more of their popular

product Racer. Each

Racer has a list price of $5.25.

recording purchases at gross invoice price periodic method
Recording Purchases at Gross Invoice Price(periodic method)

On July 6, Play Clothes purchased $4,000 of merchandise on credit with terms of

2/10, n/30 from Kid’s Clothes.

Prepare the journal entry for Play Clothes.

recording purchases at gross invoice price
Recording Purchases at Gross Invoice Price

Purchases are recorded at their gross amounts.

Gross Method

总价法

Purchases discounts taken are recorded when payment is made inside the discount period.

recording purchases at gross invoice price1
Recording Purchases at Gross Invoice Price

On July 6, Play Clothes purchased $4,000 of merchandise on credit with terms of

2/10, n/30 from Kid’s Clothes.

Prepare the journal entry for Play Clothes.

recording purchases at gross invoice price2
Recording Purchases at Gross Invoice Price

On July 15, Play Clothes pays the amount due to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

recording purchases at gross invoice price3
Recording Purchases at Gross Invoice Price

On July 15, Play Clothes pays the amount due to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

Reduces Purchase

$4,000 ´ 98% = $3,920

purchase discounts
Purchase Discounts

After we post these entries, the accounts involved look like this:

Purchase

Accounts Payable

7/6 4,000

7/6 4,000

7/15 4,000

Bal. 0

Bal. 4,000

Purchase Discounts

Cash

XXXX

7/15 3920

7/15 80

recording purchases at gross invoice price4
Recording Purchases at Gross Invoice Price

Now, assume that Play Clothes waited until July 20 to pay the full amount due to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

recording purchases at gross invoice price5
Recording Purchases at Gross Invoice Price

Now, assume that Play Clothes waited until July 20 to pay the full amount due to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

credit terms and cash discounts
Credit Terms and Cash Discounts

Purchases are recorded at their net amounts.

Purchase discounts(购货折扣) lost are recorded when payment is made outside the discount period.

Net (price) Method

净价法

Slide 6-18

credit terms and cash discounts1
Credit Terms and Cash Discounts

On July 6, Play Clothes purchased $4,000 of merchandise on credit with terms of

2/10, n/30 from Kid’s Clothes.

Prepare the journal entry for Play Clothes.

Slide 6-19

credit terms and cash discounts2
Credit Terms and Cash Discounts

On July 6, Play Clothes purchased $4,000 of merchandise on credit with terms of

2/10, n/30 from Kid’s Clothes.

Prepare the journal entry for Play Clothes.

$4,000 * 98% = $3,920

Slide 6-20

credit terms and cash discounts3
Credit Terms and Cash Discounts

On July 15, Play Clothes pays the net amount due to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

Slide 6-21

credit terms and cash discounts4
Credit Terms and Cash Discounts

On July 15, Play Clothes pays the net amount due to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

Slide 6-22

credit terms and cash discounts5
Credit Terms and Cash Discounts

Now, assume that Play Clothes waited until July 20 to pay the amount due in full to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

Slide 6-23

credit terms and cash discounts6
Credit Terms and Cash Discounts

Now, assume that Play Clothes waited until July 20 to pay the amount due in full to Kid’s Clothes.

Prepare the journal entry for Play Clothes.

Nonoperating Expense

Slide 6-24

managing discounts
If we fail to take a 2/10, n/30 discount, is it really expensive?

Days

in a

year

Number

of additional

days before

payment

Percent

paid to

keep

money

Managing Discounts

365 days ÷ 20 days × 2% = 36.5% annual rate

exercise
Exercise
  • Lamprino Appliance use periodic inventory system. On June 10,Lamprino purchase 10 televisions from Mitsu Industries on account for a total of $3000. the terms of purchase were 2/10,n/30. On June 20, Lamprino paid the account payable. Prepare the journal entries to record these transaction at :

net price method

Gross method

double posting
Double Posting
  • Post from the purchases journal to the subsidiary ledger accounts respectively (Account Payable Ledger)
  • Post from purchases journal to the controlling account in a summary

(Account Payable account in general ledger)

purchases returns and allowances
Purchases Returns and Allowances

Purchases Return . . .

Merchandise returned by the purchaser to the supplier.

Purchases Allowance . . .

A reduction in the cost of defective merchandise received by a purchaser from a supplier.

purchases returns and allowances1
Purchases Returns and Allowances

After we post these entries, the accounts involved look like this:

Purchases

Accounts Payable

3/27 48,000

3/30 5000

3/27 48,000

Bal. 48,000

Bal. 43,000

Purchases Returns and Allowances

3/28 5000

double posting1
Double Posting
  • Post from the general journals to the subsidiary accounts respectively (Account Payable Ledger)
  • Post from general journals to the controlling account in a summary

(Account Payable account and Purchase R&A in general ledger)

slide31

Revenue

expense

expense

+

-

+

+

-

+

+

-

+

Sales

Purchase

+

-

Sales R&A

Purchase R&A

-

+

-

Sales Discount

Purchase Discount

-

+

-

periodic inventory system
Periodic Inventory System

The inventory on hand and the cost of goods sold for the year are not determined until year-end.

periodic inventory system1

Average cost

Specific identification

FIFO

LIFO

Periodic Inventory System

We use one of these inventory valuation methods in periodic inventory system.

first in first out method fifo

Oldest Costs

Recent Costs

First-In, First-Out Method (FIFO)先进先出法

Cost of Goods Sold

Ending Inventory

last in first out method lifo

Recent Costs

Oldest Costs

Last-In, First-Out Method (LIFO)后进先出法

Cost of Goods Sold

Ending Inventory

specific identification
Specific Identification具体辨认法

When a unitis sold, the specific cost of the unit sold is added to cost of goods sold.

slide37

Not really. Specific identification is hard to use when we sell a lot of inventory that has lots of different costs.

Since specific identification is so easy, can’t we use it all the time?

average cost method

Cost of Goods Available for Sale

Units on hand on the date of sale

Average-Cost Method平均成本法

When a unit is sold,theaverage cost of each unitin inventory is assigned to costof goods sold.

÷

the principle of consistency
The Principle of Consistency一致性/一贯性原则

Once a company has adopted a particular accounting method, it should follow that method consistently, rather than switch methods from one year to the next.

assignment
Assignment
  • Problem2 on page 236