Service Business: Like TechKnow Consulting, Sell a service for a fee (intangible) Merchandising Business: a business that purchases goods and sell goods.

Service Business: Like TechKnow Consulting,

Sell a service for a fee (intangible)

Merchandising Business: a business that purchases goods and sell goods (tangible-

finished goods). Ex: Best Buy

Merchandise: goods that a business purchases to sell - Best buy purchases Dell computers.

Items you buy to operate your business = supplies Items you buy to sell to a customer = merchandise

SERVICE VS MERCHANDISE SERVICE VS MERCHANDISE BUSINESSBUSINESS

MERCHANDISING BUSINESSMERCHANDISING BUSINESS

Two Types of Merchandising businesses:

1. Retail merchandising business: sells to those who use or consume the goods (i.e. to you the

consumer) Example: Best Buy to you….

2. Wholesale merchandising business: a business that buys and resells merchandise to retail

merchandising businesses

HOBBY SHACK, INCHOBBY SHACK, INC

The PowerPoints for Acct. 2 are for a Retail Merchandising Business Hobby Shack, INC Sells crafts and hobby items: silk flowers, ceramics, paints

and jewelry

A Corporation Corporation: an organization with many owners Share of Stock: each unit of ownership Capital Stock: total shares of ownership Stockholder: an owner of one or more shares of a

corporation What are some advantages and disadvantages of this type of

business?

SPECIAL JOURNALSPECIAL JOURNAL

Recording journal entries: Journal = used when company has only a few daily transactions Special Journal = used by companies with many daily transactions

– use more than one journal type Don’t confuse with special columns - both have these

Special Journal is a journal used to record only one kind of transaction Five that we will use at Hoppy Shack:

Purchases Journal – purchase merchandise (sell) on account Cash Payments Journal – all cash payments Sales Journal – all sales of merchandise on account Cash Receipts Journal – all incoming cash receipts General Journal – All other transactions

LESSON 9-1LESSON 9-1

Journalizing Purchases Using a Purchases Journal

What types of transactions are entered into a Purchase Journal?

Purchase Merchandise on Account

TERMSTERMS

Cost of merchandise:

Markup:

Vendor:

the price a business pays for goods it purchases to sell

the amount added to the cost of merchandise to establish the selling price

a business from which merchandise, supplies or other assets are purchased

1. Cost $300, Sold for $450. What is the Markup?2. Sell for $700, Markup is $100. What is the cost?3. Cost was $200, Markup was $150, what is the selling price?

$150$600

$350

WHY IS MARKUP IMPORTANT?WHY IS MARKUP IMPORTANT?

Revenue = Cost of Merchandise + Markup The Capital is increased by the Markup value only

1. Cost $300, Sold for $450?2. Sold for $700, Markup is $100?3. Cost was $200, Markup was $150?

How Much does Capital Increase by?

$150$100

$150

Terms ContinuedTerms Continued

Purchase on Account

- a transaction in which the merchandise purchased is to be paid for later

Purchases Journal

- a special journal used to record only purchases of merchandise on account

Purchase on Account affects two accounts: - Purchases and Accounts Payable

PURCHASING MERCHANDISEPURCHASING MERCHANDISE

5110 Purchases – - Account to record cost of merchandise (you purchased)-Temporary account (will be closed at end of Fiscal year)-Reduces capital when merchandise purchased- Has a Normal Balance (always increases) of Debit-Increases as a Debit, Decreases as a Credit

NB+

PURCHASES ON ACCOUNTPURCHASES ON ACCOUNT

2110 Accounts Payable – -Purchases on account increases the value of what you owe - Normal Balance = Credit (not a new concept)-Decreases on Debit, Increases on Credit

1. Stamp the date received andpurchase invoice number.

PURCHASE INVOICEPURCHASE INVOICE

4. Review the vendor’s terms.

3. Initials of the person whochecked the invoice.

2. Place a check mark by each amount.

PURCHASES JOURNALPURCHASES JOURNAL page 237

Special amount column: a journal amount column headed with an account title

  General 

Sales Credit

Cash 

Date Account TitleDoc 

No.

PostRef Debit Credit Debit Credit

 Aug  1 Kim Parker, Cap. R1             5  0 0 0 00           5  0 0 0 00                                                                                                                                

PURCHASES JOURNALPURCHASES JOURNAL page 237

Special amount column: a journal amount column headed with an account title

November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83.

PURCHASING MERCHANDISE ON ACCOUNTPURCHASING MERCHANDISE ON ACCOUNT

November 2. Purchased merchandise on account from Crown Distributing, $2,039.00. Purchase Invoice No. 83.

What two Accounts are impacted and how?    PURCHASE JOURNAL         Page:  11

Date Account CreditedPurch. 

NoPost.Ref

Purchases Dr.Accts. Pay CR.

TOTALING AND RULING A PURCHASES TOTALING AND RULING A PURCHASES JOURNALJOURNAL

1. Ruled at end of Month or end of page

2. Rule a single line across the amount column

3. Write the date and Total

4. Add the amount column.

5. Write the total.

6. Rule double lines across the amount column.

TERMS REVIEWTERMS REVIEW

merchandise merchandising business retail merchandising

business wholesale

merchandising business corporation share of stock capital stock stockholder

special journal cost of merchandise markup vendor purchase on account purchases journal special amount column purchase invoice terms of sale

Work TogetherWork Together

Work Together 9-1