Efficient Cash Payments Journal Recording & Posting

1. LESSON 1-3 Journalizing and Posting Cash Payments

2. CASH PAYMENTS JOURNAL • All cash payments are recorded in the cash payments journal • A special journal used to record only cash payment transactions is called a cash payments journal • Checks are the source documents for most cash payments • The cash payments journal contains columns for general journal transactions, accounts payable, purchases discount and cash • A journal amount column that is not headed with an account title is called a general amount column LESSON 9-2

3. Cash Payments on Account • Purchases on account are expected to be paid within the stated credit period • A seller may encourage early payment by allowing a deduction from the invoice amount • A deduction that a vendor allows on the invoice amount to encourage prompt payment is called a cash discount • A cash discount on purchases taken by a customer is called a purchases discount LESSON 1-3

4. Purchases Discounts • Purchases discounts are usually stated as a percentage • 2/10, n/30 • 2/10 - 2% of the invoice amount may be deducted from the amount due if payment is made within 10 days of the invoice date • n/30 – payment of the total invoice amount must be made within 30 days of the invoice date • A purchases discount reduces the net amount of cash paid for a purchase • Purchases discounts are in the cost of merchandise division on the income statement LESSON 1-3

5. JOURNALIZING A PURCHASES DISCOUNT page 19 June 1. Paid cash on account to AudioMax, $514.50, covering Purchase Invoice No. 331 for surround sound audio equipment for $525.00, less 2% discount, $10.50. Check No. 315. 1 2 3 4 5 6 1. Write the date. 4. Write the debit amount. 2. Enter vendor name. 5. Record the discount amount. 3. Record the check number. 6. Enter the credit amount. LESSON 1-3

6. Original Purchase Invoice Amount (P336) Purchases Return (DM22) Purchase Invoice Amount After Return Amount owed on invoice: – = – = $845.00 47.50 $797.50 Purchase Invoice Amount After Return Purchases Discount Rate Purchases Discount Purchases discount: × = × = $797.50 2% $15.95 Amount due after purchases discount: Purchase Invoice Amount After Return Purchases Discount Total Amount Due – = – = $797.50 $15.95 $781.55 TAKING A DISCOUNT AFTER A PURCHASE RETURN page 20 June 2. Paid cash on account to Western Digital Systems, $781.55, covering Purchase Invoice No. 336 for video equipment for $845.00, less Debit Memorandum No. 22 for $47.50, and less 2% discount, $15.95. Check No. 316. LESSON 1-3

7. RECORDING ENTRIES IN A CASH PAYMENTS JOURNAL page 21 June 2. Paid cash for administrative supplies, $136.00. Check No. 317. 1 2 3 4 5 1. Write the date. 2. Enter the account title. 3. Record the check number. 4. Write the debit amount. 5. Enter the credit amount. LESSON 1-3

8. CASH PAYMENT TO REPLENISH PETTY CASH page 22 June 30. Paid cash to replenish the petty cash fund, $402.00: administrative supplies, $300.00; advertising expense—video, $56.00; miscellaneous expense, $46.00. Check No. 350. 2 1 3 4 5 1. Write the date. 4. Write the debit amounts. 2. Enter account titles. 5. Enter the credit amount. 3. Record the check number. LESSON 1-3

9. POSTING FROM A CASH PAYMENTS JOURNAL page 23 LESSON 1-3

10. TERMS REVIEW page 24 • cash discount • purchases discount • petty cash LESSON 1-3