Chapter 8

net 30 days or n/30

Payment in full is due 30 days after the date of the invoice

2%

The cash discount in the credit terms 2/10 n/30

Saves time and effort keeps all credit purchases in one place

Use of a purchase journal:

Purchase requisition

When the sales department needs goods, it sends a document listing the items it be ordered to the purchasing department; this document is called

purchase invoice

A bill that is received by a merchandiser for items ordered and shipped is called a

$500 to purchases $50 to freight $550 to

A company purchases merchandise for $500 plus a freight charge of $50 from a supplier payment is due in 30 days. This transaction will be recorded with which of the following entries

Purchase allowance

A price reduction from the amount originally billed is called a purchase.

2% 10 days, net 30 days ; or 2/10, n/30

If paymentis made within 10 days of the invoice date, the customer can take a 2 percent discount. Other wise, payment in full is due in 30 days.

Net 10 day EOM, or n/10 EOM

Payment in full is due 10 days after the end of the month in which the invoice was issued

1.Locate the appropriate suppliers accounts payable ledger 2. Enter the posting, and the invoice number and date 3. IN the posting reference column enter the purchases journal page number 4. Enter the amount from the accounts payable column in the purchases journal to the subsidiary ledger 5. Place a check mark in the posting reference column of the purchases journal

Place the steps to posting a credit purchase to the account payable subsidiary ledger in correct order.

cost of goods sold

The actual cost to the business of the merchandise sold to customers is called

Internal controls

The company's policies and procedures in place to safeguard assets, ensure reliability of accounting data, and promote compliance with management policies and applicable laws are called

Contra Credit

The purchases return and allowances account is a _____ cost of goods sold account, and the normal balance of this account is a _____

Freight in

Transportation charges for items purchased is called the

Purchases Freight In Accounts payable

When posting from the purchases journal to the ledger, the following accounts will be posted.

The accounting department

receives the invoice and copies of the purchases order and receiving report

The purchases department

issues an authorized purchase order and sends it to the selected supplier A receiving report is prepared when the merchandise is received

1. Locate the accounts payable ledger account and enter the date 2. Enter to Posting reference such as P1 3. Enter the amount from the A/P to the general ledger 4. Compute the new balance and enter it in the balance credit column 5. In the purchases, enter the accounts payable ledger account number in the column 6. Repeat the steps for the purchases and freight in columns

Place the steps to post the totals from the purchases journals to the ledger in correct order:

Sales Invoice

A_____________ is sent to the customers for items ordered.

A separate account for each creditors

An accounts payable subsidiary ledger that contains:

create written proof that purchases and payments are authorized. Ensure that different people are involved in the process of buying, receiving goods and making payments for same.

The objective of an internal controls system include the following:

credit balance

The purchase returns and allowances account is a contra cost of goods sold account and the normal balance of this account is on the.

Cost of goods sold

The purchases account is under a different classification

Purchases, Freight in, and Accounts Payable

The purchases journal records entries to which of the following accounts

True

True or False: A company's internal control process should ensure that the person buying and receiving goods is different from the person making payment

cash payments journal

When cash is paid to a supplier for an outstanding invoice the transaction is first recorded in a __________________________

receiving report

When goods purchased arrive at the business, they are inspected. The report prepared to show the quantity and condition of the goods received

Purchase return

a return of unsatisfactory goods is called a.

Purchases account

a temporary account used to record the cost of goods bought for resale during a period is called the

Freight in account

is an account showing transportation charges for items purchased. It is also called the Transportation in account

Purchase account

is an account used to record cost of goods bought for resale during a period

The sales department

sends an authorized purchase requisition to the purchasing department

$2750 credit

A creditors account in the accounts payable ledger has a $1900 beginning balance. After a transaction for $850 is posted from the purchases journal, the balance of the creditors account is.

schedule of accounts payable

A list of all the balances owed to creditors, prepared to prove that the control account and the subsidiary ledger are equal is called a

Purchases

Purchases of goods on credit are recorded in a _________ journal