Lesson 09-4-G

LESSON 9-4 Accounting for Cash Payments LO8 Record cash payments using a cash payments journal. LO9 Record replenishment of a petty cash fund. Learning Objectives Cash Payments Journal A cash payments journal is a special journal used to record only cash payment transactions. LO8 SLIDE 2 Lesson 9-4 Trade Discount The retail price listed in a catalog or on an Internet site is called a list price. A trade discount is a reduction in the list price granted to a merchandising business. The price after the trade discount has been deducted from the list price is referred to as the net price. LO8 SLIDE 3 Lesson 9-4 Cash Discount A cash discount is a deduction that a vendor allows on an invoice amount to encourage prompt payment. A journal amount column that is not headed with an account title is called a general amount column. LO8 SLIDE 4 Lesson 9-4 Cash Payment of an Expense November 3. Wrote a check to Kelser Promotions for advertising, $600.00. Check No. 689. Advertising Expense 600.00 Cash 600.00 3 Check Number 1 Date 5 Credit 4 Debit 2 Account Title LO8 SLIDE 5 Lesson 9-4 Buying Supplies for Cash November 6. Wrote a check to Wells Office Supply for store supplies, $56.20. Check No. 690. Supplies—Office 56.20 Cash 56.20 3 Check Number 1 Date 5 Credit 4 Debit 2 Account Title LO8 SLIDE 6 Lesson 9-4 Cash Payments for Purchases November 9. Purchased merchandise from Polar Refrigeration for cash, $480.00. Check No. 697. Purchases 480.00 Cash 480.00 3 Check Number 1 Date 5 Credit 4 Debit 2 Account Title LO8 SLIDE 7 Lesson 9-4 Cash Payments on Account with Purchases Discounts The period of time during which a customer may take a cash discount is called the discount period. When a company that has purchased merchandise on account takes a cash discount, it is called a purchases discount. An account that reduces a related account on a financial statement is called a contra account. LO8 SLIDE 8 Lesson 9-4 Cash Payments on Account with Purchases Discounts November 14. Paid cash on account to Galle Electric, $627.20, covering Purchase Invoice No. 489 for $640.00, less 2% discount, $12.80. Check No. 702. 3 Check Number 1 Date 5 Cash Discount 4 Purchase Invoice Amount 2 Vendor Name Accounts Payable 640.00 Purchases Discount 12.80 6 Purchase Invoice Amount Less the Cash Discount Cash 627.20 LO8 SLIDE 9 Lesson 9-4 Cash Payments on Account without Purchases Discounts Accounts Payable 2,512.00 Cash 2,512.00 3 Check Number 1 Date 5 Total Purchase Invoice Amount 4 Total Purchase Invoice Account 2 Vendor Name November 21. Wrote a check to S&R Imports to pay on account, $2,512.00, covering Purchase Invoice No. 468. Check No. 706. LO8 SLIDE 10 Lesson 9-4 Replenishing a Petty Cash Fund November 22. Paid cash to replenish the petty cash fund, $214.82: advertising, $124.00; store supplies, $62.18; miscellaneous, $28.95; cash over, $0.31. Check No. 707. Check Number Date Cash Over is a Credit Amounts Account Title Total Cash Payment LO9 SLIDE 11 Lesson 9-4 Lesson 9-4 Audit Your Understanding 1. What is the net price of an item with a $1,200.00 list price having a 60% trade discount? ANSWER $480.00 SLIDE 12 Lesson 9-4 Lesson 9-4 Audit Your Understanding 2. Why would a vendor offer a cash discount to a customer? ANSWER To encourage early payment SLIDE 13 Lesson 9-4 Lesson 9-4 Audit Your Understanding 3. What is recorded in the general amount columns of the cash payments journal? ANSWER Cash payment transactions that do not occur often SLIDE 14 Lesson 9-4 Lesson 9-4 Audit Your Understanding 4. What is meant by terms of sale 2/10, n/30? ANSWER Two ten means 2% of the invoice amount may be deducted if the invoice is paid within 10 days of the invoice date. Net thirty means that the total invoice amount must be paid within 30 days. SLIDE 15 Lesson 9-4 Lesson 9-4 Audit Your Understanding 5. When journalizing a cash payment to replenish petty cash, what is entered in the Account Title column of the cash payments journal? ANSWER The titles of the accounts for which the petty cash funds were used SLIDE 16 Lesson 9-4 Lesson 9-4 Audit Your Understanding 6. How is cash short recorded in the account, Cash Short and Over? ANSWER As a debit SLIDE 17 Lesson 9-4