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Accounting 3Accounting 3
Chapter 18Chapter 18
Section 4Section 4
General JournalGeneral Journal For corporations, general journals are used For corporations, general journals are used
to record any information that will not go into to record any information that will not go into any of the special journals.any of the special journals.
This usually includes any transactions This usually includes any transactions involving memorandums.involving memorandums.
Example of General JournalExample of General JournalGeneral Journal Page ___
Date Account TitlePost
Ref.
Doc.
No.Debit Credit
Purchases Returns and Purchases Returns and AllowancesAllowances
When customers do not want to keep When customers do not want to keep merchandise that is inferior or damaged, merchandise that is inferior or damaged, they may be allowed to return it. This they may be allowed to return it. This credit is called a credit is called a Purchases ReturnPurchases Return..
When customers’ merchandise is When customers’ merchandise is damaged but still usable, they may be damaged but still usable, they may be allowed a credit off of what is owed for allowed a credit off of what is owed for that merchandise. This credit is called a that merchandise. This credit is called a Purchases AllowancePurchases Allowance..
Debit MemorandumsDebit Memorandums
A A Debit MemorandumDebit Memorandum is a form prepared is a form prepared by the customer showing the price by the customer showing the price deduction taken by the customer for deduction taken by the customer for returns and allowances.returns and allowances.
It is called a debit memorandum because It is called a debit memorandum because the customer records the amount as a the customer records the amount as a debit (deduction) to the vendor account debit (deduction) to the vendor account to show the decrease in the amount to show the decrease in the amount owed.owed.
Example of Debit Example of Debit MemorandumMemorandum
Debit Memorandum 78 Date: _______________
Winning Edge, Inc.
1420 College Plaza
Atlanta, GA 30337-1726
To:
Second Round, Inc.
162 Webster Road
Miami, FL 33127-6214
Account Number:
280
Quantity Units Description Price Total
22 Dz. 6.50 143.00Grade 2 driving range golf balls, your invoice number 16724, are being returned by mail. Our order specified grade 3 golf balls.
March 8, 2007
Journalizing Purchases Journalizing Purchases Returns and AllowancesReturns and Allowances
Purchases returns and allowances decrease Purchases returns and allowances decrease the amount of purchases. Therefore, the amount of purchases. Therefore, Purchases Returns and AllowancesPurchases Returns and Allowances is a is a contra contra accountaccount (an account that reduces a related (an account that reduces a related account on a financial statement) to account on a financial statement) to Purchases.Purchases.
Purchases Returns and Allowances has a Purchases Returns and Allowances has a normal credit balancenormal credit balance..
Example transaction and visual steps on next Example transaction and visual steps on next slide.slide.
March 8. Returned merchandise to Second Round, Inc., March 8. Returned merchandise to Second Round, Inc., $143.00, covering Purchase Invoice No. 230. Debit $143.00, covering Purchase Invoice No. 230. Debit Memorandum No. 78.Memorandum No. 78.
General Journal Page ___
Date Account TitlePost
Ref.
Doc.
No.Debit Credit
3
Mar 8 Accounts Pay/ Second Round, Inc. DM78 1 4 3 00
Purchases Ret. and Allowances 1 4 3 00
Both the Accounts Payable and Second Round, Inc. accounts must be debited for this transaction. Rather than taking up two lines for the accounts debited (and also un-balancing the accounting equation), Accounts Payable and Second Round, Inc. must be written on the same line.
The second line of any entry in the general journal needs to be indented.
Journalizing Buying Journalizing Buying Supplies on AccountSupplies on Account
This is handled just like supplies has This is handled just like supplies has always been except that Accounts always been except that Accounts Payable and the vendor account name Payable and the vendor account name must be on the credit line of the entry. must be on the credit line of the entry.
Example Transaction: March 9. Bought Example Transaction: March 9. Bought supplies on account from Winter supplies on account from Winter Supplies, $316.00. Memorandum No. 26.Supplies, $316.00. Memorandum No. 26.
Visual steps on next slide.Visual steps on next slide.
General Journal Page ___
Date Account TitlePost
Ref.
Doc.
No.Debit Credit
3
Mar 9 Supplies M26 3 1 6 00
Accounts Pay/ Winter Supplies 3 1 6 00
Posting from a General Posting from a General JournalJournal
Posting must be done Posting must be done individuallyindividually to to allall accounts accounts involved in involved in eacheach entry. entry.
Most accounts will be in the general ledger. However, Most accounts will be in the general ledger. However, vendor accounts are in the Accounts Payable ledger.vendor accounts are in the Accounts Payable ledger.
The The posting referenceposting reference for the general journal is a for the general journal is a GG along with the page number.along with the page number.
On the lines which use two accounts, both account On the lines which use two accounts, both account numbers must be included in the posting reference numbers must be included in the posting reference column of the general journal. Ex. column of the general journal. Ex.
Posting will be demonstrated in the Work Together Posting will be demonstrated in the Work Together problem.problem.
2115450
Work Together p. 475Work Together p. 475General Journal Page ___
Date Account TitlePost
Ref.
Doc.
No.Debit Credit
3
Mar 3 Accounts Pay/ Trainor Company DM18 2115450 2 3 8 00
Purchases Ret. and Allowances 5115 2 3 8 00
5 Supplies M355 1140 1 5 2 00
Accounts Pay/ Hughes Supply 2115420 1 5 2 00
7 Store Equipment M356 1215 4 2 3 5 00
Accts Pay/ Retail Displays, Inc. 2115430 4 2 3 5 00
To see the postings, click on the posting reference numbers which are hyperlinked.
Assignment
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
General LedgerSupplies 1140
Store Equipment 1215
Mar 1 Balance 2 7 6 3 00
5 G3 1 5 2 00 2 9 1 5 00
Mar 1 Balance 12 7 6 1 00
7 G3 4 2 3 5 00 16 9 9 6 00
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
Account Acct No.
Date ItemPost
RefDebit Credit BALANCE
DEBIT CREDIT
General Ledger
Accounts Payable 2115
Mar 1 Balance 3 1 3 1 00
3 G3 2 3 8 00 2 8 9 3 00
5 G3 1 5 2 00 3 0 4 5 00
7 G3 4 2 3 5 00 7 2 8 0 00
Purchases Returns and Allowances 5115
Mar 1 Balance 6 9 2 00
3 G3 2 3 8 00 9 3 0 00
Account Acct No.
Date ItemPost
RefDebit Credit
Credit
Balance
Account Acct No.
Date ItemPost
RefDebit Credit
Credit
Balance
Accounts Payable LedgerHughes Supply 420
Mar 1 Balance 4 7 2 00
5 G3 6 2 4 00
Retail Displays, Inc. 430
Mar 1 Balance 1 6 8 7 00
7 G3 4 2 3 5 00 5 9 2 2 00
Account Acct No.
Date ItemPost
RefDebit Credit
Credit
Balance
Accounts Payable Ledger
Trainor Company 450
Mar 1 Balance 9 7 2 00
3 G3 2 3 8 00 7 3 4 00
AssignmentAssignment
Do Application 18-5 by hand.Do Application 18-5 by hand. Turn it into Mrs. Middleton.Turn it into Mrs. Middleton. Complete Master 18-7 on the computer.Complete Master 18-7 on the computer.
Follow instructions from Browser window.Follow instructions from Browser window. Print all journals and ledgers Print all journals and ledgers usedused..
Turn into Mrs. Middleton.Turn into Mrs. Middleton. Move on to Chapter 19 Section 1.Move on to Chapter 19 Section 1.
