Week of April 15, 2020

I’m still hereeeeeeeeeeeeeee!  So here we go……….CHAPTER 11 Using the General Journal

We have looked at all of the special journals;  Purchases, Sales, Cash Payments, and Cash Receipts.  Now what will we use the General Journal for?  There are a few transactions that do not fit the descriptions for any of the special journals.

Chapter 11, Section 1

1)     What do we do when we are dissatisfied with a purchase of merchandise and wish to return the merchandise to the vendor?  First, we should prepare a new source document:  A DEBIT MEMORANDUM

Why a debit memo?  We will reduce Accounts Payable for the amount we owe for merchandise that we want to return.  So we create a debit memo (a debit reduces a liability). Now, we need a credit.  We have an account that tracks the amount of merchandise that we return:  PURCHASES RETURNS AND ALLOWANCES-this is a contra purchases account and is increased with a credit.

Select the General Journal and this is the transaction:  Debit – Accounts Payable/Vendor name        Credit –  Purchases Returns and Allowances  EASY!

2)  Next, how do we journalize buying Supplies on Account?  There is no special journal for this transaction.  This is a job for the General Journal!

Debit:  Supplies     and       Credit:     Accounts Payable/ Vendor Name

Now, Complete Work Together 11-1 and On Your Own   11-1  REMEMBER  When there is a diagonal in the account title (Accts. Pay/Olen, Inc.), post the amount to both accounts with a diagonal in the posting reference column  (2110/240)  NEXT, complete Application Problem 11-1.

Chapter 11, Section 2

1)  What do we do when a charge customer is dissatisfied with a sale on account that we have made to them?  We allow for them to return the sold merchandise.  First, we should prepare a new source document:  A CREDIT MEMORANDUM  Why a credit memo?  We will credit Accounts Receivable to reduce the amount that the customer owes to us when they return the merchandise.  Now, we need a debit.  We will debit a new account:  SALES RETURNS AND ALLOWANCES (this is a contra sales account).  REMEMBER,  the customer was also charged a SALES TAX.  The customer no longer owes sales tax on returned merchandise.

Select the General Journal and this is the transaction:  Debit –  Sales Returns and Allowances    Debit –  Sales Tax Payable         Credit  – Accounts Receivable/Customer name for the total (Sales + tax)  See the example in your electronic textbook.

2)  What do we do if we find that we have made an error in POSTING?  We simply REVERSE THE ERROR IN THE GENERAL JOURNAL.  WHEN WE POST THE REVERSAL, THE NEW ACCOUNT BALANCES WILL BE CORRECT.  EX.  We found that a sales on account to Skinner College was incorrectly charged to the account of Wells Apartments for $334.00  To reverse the error:  1st, add the sale on account to Skinner College with a debit.  2nd, remove the error from Wells Apartments with a credit.  See example in electronic textbook.  This is called a correcting entry.  

Now, complete Work Together 11-1 and On Your Own 11-2  “Granted credit” means we credited Accts. Rec. because the customer returned the merchandise. Finally, complete Application Problems 11-1 & 11-2.

We will skip Section 11-3 until I can see you again.  I really miss you all and hope that you and your family are well.  Stay safe!   jholcomb