ACC 200 ACCT 200-010
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This 8 page Class Notes was uploaded by Loretta Hellmann on Sunday October 2, 2016. The Class Notes belongs to ACCT 200-010 at Western Kentucky University taught by Stacy Wade (Bibelhauser) in Fall 2016. Since its upload, it has received 15 views. For similar materials see Intro Accounting-Financial in Accounting at Western Kentucky University.
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Date Created: 10/02/16
REVIEW OF ENTRIES FOR PURCHASING AND SALES TRANSACTIONS IN A PERPETUAL SYSTEM: Entries for the buyer: Inventory xxxx Accounts Payable (or Cash) xxxx (To record the purchase of merchandise) Accounts Payable xxxx Inventory xxxx (To record the return of merchandise by the buyer) Accounts Payable xxxx (for the balance due) Cash xxxx (for the balance less discount) Inventory xx (for the amount of the discount) (To record the payment IF PAID in the DISCOUNT PERIOD) Accounts Payable xxxx (balance due) Cash xxxx (balance due) (To record the payment WITHOUT a discount) Entries for the seller: Accounts Receivable (or Cash) xxxx (amount of the sale) Sales Revenue xxxx (amount of the sale) Cost of Goods Sold xxxx (your cost in the mdse) Inventory xxxx (To record the sale of merchandise-two entries) Sales Returns and Allowances xxx Accounts Receivable (or Cash) xxx Inventory xxx Cost of Goods Sold xxx (To record the return of merchandise originally sold by you—your customers returned the products; take two entries as well) Cash xxxx (for the amount owed less the discount) Sales Discount xx (for the amount of the discount) Accounts Receivable xxxx (for the amount owed to you) (To record the receipt IF RECEIVED in the DISCOUNT PERIOD) Cash xxxx (balance due) Accounts Receivable xxxx (balance due) (To record the receipt WITHOUT a discount) freight costs are often incurred when buying and selling products just as they are when individuals buy or sell things online. The way the freight is classified depends on who is paying for it. If you are purchasing inventory, freight is simply considered to increase the cost of the inventory. I generally explain this by giving an example of buying a shirt online….if the shirt costs $25 and the freight is $5…..the cost to the person buying the shirt is $30. It doesn’t matter if it’s the actual cost or the freight…it still costs $30. The same is true for a business buying inventory. If the inventory itself costs $500 and they have to pay $50 to have it delivered….the inventory costs $550. In many cases, the freight charges are paid separately from the inventory because (if it’s a large order) they may have to have the inventory shipped in on a truck or train. So….show them the example below for the BUYER. FREIGHT: When the buyer pays the freight – Debit “Inventory” and Credit “Cash” If you are SELLING the product, freight is handled differently. It is considered to be a regular operating expense….just like rent, insurance, or advertising. It’s simply a cost of doing business. So, when you are the SELLER, you will debit an expense account. In this book, they use the “Freight Out” account. Show them the example below. When the seller pays the freight – Debit “Freight Out” and Credit “Cash” (Remember that “Freight Out” is an operating expense to the seller just like “Rent Expense” or “Utilities Expense”….it is added to expenses rather than to inventory since the seller isn’t keeping the inventory at that point.) Have students open their books to Problem 5-2A. Tell them that you are going to work through the problem with them. Read the introduction to the problem. Then, read the sentences below….. Remember that all SALES on account receive credit terms of 2/10, n/30 per the information in the problem. The PURCHASES of merchandise may have different terms because those are set by the supplier…not Powell Warehouse. Before putting each transaction into a journal entry, you should be sure to clarify to yourself if you are/were the buyer or the seller. Take out a separate sheet of paper where you can record the journal entries. After you answer each of these questions, make the appropriate journal entry. Read the first transaction. Ask if they are the buyer or the seller. GO PRETTY SLOWLY. June 1: Are you (Powell Warehouse) the buyer or the seller? ____________ Buyer….then record the transaction on the board. Remind them that they won’t use the credit terms UNTIL the account is paid. They don’t need that information now. Also remind them that the entry formats/examples are listed above. June 1Inventory $1,040 Accounts Payable $1,040 Read the second transaction. Ask if they are the buyer of the seller. Repeat before each transaction. June 3: Are you the buyer or the seller? _____________ SellerRemember that there are two transactions if you are the seller. One for the sale and one for the cost of the sale. June 3Accounts Receivable $1,200 Sales Revenue $1,200 COGS $ 720 Inventory $ 720 June 6: Were you the buyer or the seller in the original transaction? _____________ Buyer June 6Accounts Payable $ 40 Inventory $ 40 June 9: Were you the buyer or the seller in the original transaction? _____________ Buyer Questions: (1) Is there a discount? Yes 2/10, n/30—2% (Refer back to the entry on the 1 .) (2) Did we return anything? Yes (3) Are we paying within the discount period? Yes (Refer back to the entry on the 1 ) June 9Accounts Payable $1,000 Cash $ 980 [1000 – (1000 x .02)] = (1000-20) Inventory $ 20 (1000 x .02) June 15: Were you the buyer or the seller in the original transaction? _____________ Seller Questions: (1) Is there a discount? Yes 2/10, n/30---2% [This information is in the first sentence of the problem.) (2) Did they return anything? No (3) Are they paying within the discount period? No (Refer back to the entry on the 3 )d June 15 Cash $1,200 Accounts Receivable $1,200 June 17: Are you the buyer or the seller? _____________ Seller June 17 Accounts Receivable $1,200 Sales Revenue $1,200 COGS $ 730 Inventory $ 730 June 20: Are you the buyer or the seller? _____________ Buyer June 20 Inventory $ 720 Accounts Payable $ 720 June 24: Were you the buyer or the seller in the original transaction? _____________ Seller Questions: (1) Is there a discount? Yes –2/10, n/30---2% [This information is in the first sentence of the problem.) (2) Did they return anything? No (3) Are they paying within the discount period? Yes (Refer back to entry on the 17 ) June 21 Cash $1,176 [2000 – (2000 x . 01)] = (2000-20) Sales Discounts 24 (2000 x .01) Accounts Receivable $1,200 June 26: Are you the buyer or the seller? _____________ Buyer Questions: (1) Is there a discount? Yes 1/15, n/30—1% (Refer back to the entry on June 20 (2) Did we return anything? No (3) Are we paying within the discount period? No (Refer back to the entry on the June 20) June 26 Accounts Payable $ 720 Cash $ 720 June 28: Are you the buyer or the seller? ___________Seller June 28 Accounts Receivable $1,300 Sales Revenue $1,300 COGS $ 780 Inventory $ 780 June 30: Were you the buyer or the seller in the original transaction? _____________ Seller- this is a sales return….our customers are returning merchandise to us. This will require two entries. Basically, it’s a reversal of the two sales entries with an account title change for Sales Revenue. June 30 Sales Returns and Allowances $ 130 Accounts Receivable $ 130 Inventory $ 80 COGS $ 80 ASSIGNMENT: HAVE THEM WORK IN GROUPS OF 3. They should turn in one paper with all three names on it. (You can use one or two groups of either 2 or 4 if the class doesn’t work out to be in 3’s.) Have them do the JOURNAL ENTRIES ONLY for P5-1A. They can leave once their group is finished. Week 6 Notes Tuesday, September 27, 2011:18 AM Merchandising business- purchases a product from supplier and sells to customer New Accounts Sales Revenue -> revenue account Sales price/gross receipts Normal credit Inventory -> current asset Debit balance Return and allowances -> "negative" Contra revenue Debit balance Sales discounts -> "negative" contra revenue Debit balance Cost of goods sold (COGS) -> expense Debit balance Test 2 Page 1 Test 2 Page 2 Test 2 Page 3
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