Kế toán, kiểm toán - Chapter thirteen: Accounting for purchases

CHAPTER THIRTEENACCOUNTING FOR PURCHASES1. Record the entries for the purchase of merchandise for cash and on credit.2. Record the entries for the purchase of supplies and other assets.3. Record purchases discounts4. Record the entries for freight in.5. Record the entries for purchases returns and allowances.ACCOUNTING FOR PURCHASESObjectives:3Recording Purchases of MerchandiseThe purchase of merchandise for resale is recorded in an account called Merchandise Purchases. This account is usually referred to as a cost account and is a temporary account.4Recording Purchases of Merchandise (continued)Like the expense accounts, the Purchases account decreases owner’s equity.5Transaction$880 worth of merchandise was purchased for cash. 6Transaction AnalysisMerchandise purchases is debited for $880.Cash is credited for $880. 7Transaction$1150 worth of merchandise was purchased on credit. 8Transaction AnalysisMerchandise purchases is debited for $1150.Accounts payable is credited for $1150. 9Recording Other PurchasesBe careful to record only purchases of merchandise for resale in the Merchandise Purchases account. Purchases of permanent assets, such as computers, copiers, and delivery equipment should be debited to the appropriate asset account and credited to Cash or Accounts Payable.10Recording Amounts Paid for Purchases of Merchandise on CreditAccounts Payable is debited and Cash is credited.11Transaction If the business takes advantage of a 2% discount on purchases of $1150, how would the transaction be recorded? 12Transaction Analysis2% of $1150 is $23.Accounts payable is debited for $1150.Cash is credited for $1127.Purchases discount is credited for $23.13Transaction Analysis (continued)14Recording Transportation Charges on Merchandise PurchasesFreight in, another cost account, is debited for the transportation charges on all incoming merchandise purchases.15Recording Transportation Charges on Merchandise Purchases (continued)If the purchaser pays the transportation company directly, Freight In is debited and Cash is credited. 16Recording Transportation Charges on Merchandise Purchases (continued)If the seller lists the transportation charges on the invoice, then the purchaser owes the seller for both the merchandise and the transportation charges, resulting in a compound entry. 17Recording Purchases Returns and AllowancesWhen a business returns goods or receives an allowance, there is a decrease in the cost of its merchandise purchases.This decrease is recorded in a cost account called Purchases Returns and Allowances. 18Accounting TerminologyFreight inMerchandise purchasesPurchases discountPurchases returns and allowances19Chapter SummaryPurchases of merchandise for resale are debited to a cost account called Merchandise Purchases.Purchases of permanent assets, such as equipment, are debited to an appropriate asset account. 20Chapter Summary (continued)For a cash discount, the buyer credits the amount of the discount to a cost account called Purchases Discount.The purchaser may be required to pay transportation charges on merchandise. These charges are debited to the Freight In account.21Chapter Summary (continued)The Purchases Returns and Allowances account is used to record the decrease in the cost of merchandise purchases that results when a business returns goods or receives allowances.22Chapter Summary (continued)Purchases Returns and Allowances is credited for all returns and allowances.If the business is given a cash refund, the Cash account is debited.If the amount is deducted from a balance that the business owes, Accounts Payable is debited.231. Purchases Returns and Allowances is debited for all returns and allowances.2. For a cash discount, the buyer credits the amount of the discount to a cost account called Purchases Discount.3. If the business is given a cash refund, the Cash account is credited.Topic QuizAnswer the following true/false questions:TRUEFALSEFALSE24 Investigating on the InternetSources of information about purchases can be accessed at various corporate websites.As a research assignment, access a business website and report those sources of information that might concern purchases of merchandise.25(Return to Topic Quiz)1. Purchases Returns and Allowances is debited for all returns and allowances.FALSE Purchases Returns and Allowances is credited for all returns and allowances.26(Return to Topic Quiz)3. If the business is given a cash refund, the Cash account is credited.FALSE If the business is given a cash refund, the Cash account is debited.27