chapter 6 purchases and purchases journal 采购和采购日记账

Chapter 6

Purchases and Purchases Journal

采购和采购日记账

Now, let’s talk about

purchase!

Merchandize Inventory Sales tax payable

Asset O’ELiability Revenue Expense= + -+

+ -

purchase Sales

+++ --

-

Purchase R&A

+-

Sales R&A

+ -

Purchase AccountsPurchase Accounts

Purchase Dept Supplier

Receiving Dept

Accounting Dept

DepartmentPurchase requisition Purchase

order

Receivingreport

DeliveryInvoice

verification

Payment

record

Purchase procedures and control

Purchase procedures and control

• Record the purchases of merchandise on account only.

• What is the difference between the sales journal and purchases journal?

• What is the similarity?

Purchases JournalPurchases Journal

Cash Discount/Purchases Discount/Sales Discount

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

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

Terms

Time

Due

Discount Period

Full amountless discount

Credit Period

Full amount due

Purchase or SalePurchase or Sale

Exh. 6-7

Credit Terms and Cash Discount信贷 / 信用条件 现金折扣

2/10, n/30Read as: “Two ten, net thirty”

When manufacturers and wholesalers sell their products on account, the cre

dit terms are stated in the invoice.

Credit Terms and Cash Discount

Credit Terms and Cash Discount

2/10, n/30Percentage of Discount

# of Days Discount Is Available

Otherwise, the Full

Amount Is Due

# of Days when Full Amount Is

Due

Trade Discount

ExampleExampleJen Co, Inc. offers a 30% tradeJen Co, Inc. offers a 30% trade

discount on orders of 1,000discount on orders of 1,000units or more of their popularunits or more of their popular

product Racer. Each product Racer. Each Racer has a list price of $5.25.Racer has a list price of $5.25.

ExampleExampleJen Co, Inc. offers a 30% tradeJen Co, Inc. offers a 30% trade

discount on orders of 1,000discount on orders of 1,000units or more of their popularunits or more of their popular

product Racer. Each product Racer. Each Racer has a list price of $5.25.Racer has a list price of $5.25.

Used by manufacturers and wholesalers to Used by manufacturers and wholesalers to change selling prices without republishing their change selling prices without republishing their

catalogs.catalogs.

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

Purchases are recorded at their gross amounts.

Purchases discounts taken

are recorded when payment is made inside the discount period.

Gross Method

总价法

Recording Purchases at Gross Invoice Price

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 Price

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 Price

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 PurchaseReduces Purchase$4,000 98% =

$3,920

$4,000 98% = $3,920

Purchase Discounts

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

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

Purchase Accounts Payable

7/6 4,000 7/6 4,000

7/15 80

7/15 4,000

Bal. 4,000 Bal. 0

Purchase Discounts Cash

7/15 3920XXXX

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 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.

Slide 6-18

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 peri

od.

Net (price) Method

净价法

Slide 6-19

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 6-20

Credit Terms and Cash Discounts

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

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 6-21

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 Discounts

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

Prepare the journal entry for Play Clothes.

Slide 6-23

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 6-24

Credit Terms and Cash Discounts

Nonoperating ExpenseNonoperating Expense

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.

Managing Discounts

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

365 days ÷ 20 days × 2% = 36.5% annual rate36.5% annual rate 365 days ÷ 20 days × 2% = 36.5% annual rate36.5% annual rate

Daysin ayear

Daysin ayear

Numberof additionaldays before

payment

Numberof additionaldays before

payment

Percentpaid to keep

money

Percentpaid to keep

money

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

• 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 Return . . .Purchases Return . . .

Merchandise returned by the Merchandise returned by the purchaser to the supplier.purchaser to the supplier.

Purchases Allowance . . .Purchases Allowance . . .

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

Purchases Returns and Allowances

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

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

Purchases Accounts Payable

3/27 48,000

3/27 48,000

3/28 5000

3/30 5000Bal. 48,000

Bal. 43 ， 000Purchases Returns and Allowances

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)

expense

+ -

Purchase

Purchase R&A

Purchase Discount

+

+

-

+-

-

-

-

expense

+

Revenue

Sales

+

Sales R&A

+

+

Sales Discount

+

-

-

The inventory on hand and the cost of goods

sold for the year are not

determined until year-end.

Periodic Inventory System

Specific identification

LIFO

Average cost

FIFO

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

Periodic Inventory System

Cost of Goods Sold

Cost of Goods Sold

Ending InventoryEnding

Inventory

Oldest Costs

Oldest Costs

Recent Costs

Recent Costs

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

Cost of Goods Sold

Cost of Goods Sold

Ending InventoryEnding

Inventory

Recent Costs

Recent Costs

Oldest Costs

Oldest Costs

Last-In, First-Out Method (LIFO)后进先出法

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.

Since specific identification is so

easy, can’t we use it all the time?

Not really. Specific identification is hard to use

when we sell a lot of inventory that has lots of

different costs.

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,the average cost of each unit

in inventory is assigned to cost

of goods sold.

When a unit is sold,the average cost of each unit

in inventory is assigned to cost

of goods sold.

Inventory Valuation Methods: A SummaryCosts Allocated to:

Valuation Method

Cost of Goods Sold Inventory Comments

Specific Actual cost of Actual cost of units Parallels physical flow identification the units sold remaining Logical method when units

are uniqueMay be misleading for identical units

Average cost Number of units sold times the

Number of units on hand times the

Assigns all units the same average unit cost

average unit cost average unit cost Current costs are averaged in with older costs

First-in, First-out (FIFO)

Cost of earliest purchases on

Cost of most recently

Cost of goods sold is based on older costs

hand prior to the sale

purchased units Inventory valued at current costsMay overstate income during periods of rising prices; may increase income taxes due

Last-in, First-out (LIFO)

Cost of most recently

Cost of earliest purchases

Cost of goods sold shown at recent prices

purchased units (assumed still in inventory)

Inventory shown at old (and perhaps out of date) costsMost conservative method during periods of rising prices; often results in lower income taxes

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.

The Principle of Consistency一致性 / 一贯性原则

Assignment

• Problem2 on page 236

Continue…… Continue……

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