Record the transaction into general journal.
Explanation of Solution
Journalizing:
Journalizing refers to that process in which the transactions of an organization are recorded in a sequence. Based on the recorded entries, the accounts are posted to the relevant ledger accounts.
The general journal recording the transactions is as follows:
Recording the purchases on cash:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 1, 2019 | Purchases | 2,500 | ||
Cash | 2,500 | |||
(to record the inventory purchased on cash) |
Table (1)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.
Recording the purchases on credit:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 2, 2019 | Purchases | 2,200 | ||
Accounts payable/Company BD | 2,200 | |||
(to record the inventory purchased on account with terms1/10, n/30) |
Table (2)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • Accounts payable is liability and balance of accounts payable is increasing. Therefore, it is credited.
Recording the purchases on credit including freight charges:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 5, 2019 | Purchases | 3,900 | ||
Freight In | 100 | |||
Accounts payable/Company DC | 4,000 | |||
(to record the inventory purchased on account with terms2/10, n/30) |
Table (3)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • The freight-in account is debited. This is because the freight-in account is an expense account and it has normal debit balance which is increasing.
- • Accounts payable is liability and balance is increasing. Therefore, it is credited.
Recording the payment made:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 10, 2019 | Accounts payable/Company BD | 2,200 | ||
Purchases discounts | 22 | |||
Cash | 1,978 | |||
(to record the payment made and receiving purchases discount) |
Table (4)
- • The accounts payable is liability and the account balance is decreasing. Therefore, accounts payable account is debited.
- • The purchases discount account is a contra expense account. The account has the normal credit balance and its increasing. Therefore, it is credited.
- • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.
Recording the purchases returned and credit memorandum received:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 10, 2019 | Accounts payable/Company DC | 300 | ||
Purchases returns and allowances | 300 | |||
(to record the inventory returned and credit memorandum received) |
Table (5)
- • The accounts payable account is a liability account. The accounts payable account has the normal credit balance and it is decreasing. Therefore, it is debited.
- • The purchase returns and allowances account is contra expenses account. The account has the normal credit balance and increasing. Therefore, it is credited.
Recording the purchases on credit:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 11, 2019 | Purchases | 1,700 | ||
Accounts payable/Company BC | 1,700 | |||
(to record the inventory purchased on account with terms1/10, n/30) |
Table (6)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • Accounts payable is liability and balance of accounts payable is increasing. Therefore, it is credited.
Recording the payment made:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 14, 2019 | Accounts payable/Company DC | 3,700 | ||
Purchases discounts | 36 | |||
Cash | 3,664 | |||
(to record the payment made and receiving purchases discount) |
Table (7)
- • The accounts payable is liability and the account balance is decreasing. Therefore, accounts payable account is debited.
- • The purchases discount account is a contra expense account. The account has the normal credit balance and its increasing. Therefore, it is credited.
- • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.
Recording the purchases on credit:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 15, 2019 | Purchases | 2,980 | ||
Accounts payable/Company SS | 2,980 | |||
(to record the inventory purchased on account with terms n/30) |
Table (8)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • Accounts payable is liability and balance of accounts payable is increasing. Therefore, it is credited.
Recording the purchases on cash:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 20, 2019 | Purchases | 1,900 | ||
Cash | 1,900 | |||
(to record the inventory purchased on cash) |
Table (9)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.
Recording the purchases returned:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 24, 2019 | Cash | 175 | ||
Purchases returns and allowances | 175 | |||
(to record the inventory returned and cash received) |
Table (10)
- • The cash account is an asset account and the account balance is increasing. Therefore, it is debited.
- • The purchase returns and allowances account is contra expenses account. The account has the normal credit balance and increasing. Therefore, it is credited.
Recording the purchases on credit including freight charges:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
August 30, 2019 | Purchases | 2,125 | ||
Freight In | 75 | |||
Accounts payable/Company DC | 2,200 | |||
(to record the inventory purchased on account with terms2/10, n/30) |
Table (11)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • Freight-in is an expense and expenses are increases. Hence, freight-in account is debited.
- • Accounts payable is liability and balance of accounts payable is increasing. Therefore, it is credited.
The percentage of freight charges in the total due amount can be calculated as follows:
Substitute $100 for freight charges and $4,000 for total due amount in the above formula.
The amount $100 as freight charges can be identified as two and half percent of total amount $4,00due to the company DC.
Working Note:
Calculation of purchases discount:
The purchases discounts are received by the buyer from the seller. The purchases discounts are received by the buyer for fulfilling the terms of timely payment to seller for purchases. The terms related to paying on timely basis with the company BC were agreed as 1/10, n/30. The terms 1/10, n/30 means the buyer is entitled to receive one percent of purchase discount on the purchases amount. The buyer will be entitled to the discount only if the payment is paid within ten days after provided invoice.
The amount calculated as purchase discount would be $22.
Calculation of purchases discount:
The purchases discounts are received by the buyer from the seller. The purchases discounts are received by the buyer for fulfilling the terms of timely payment to seller for purchases. The terms related to paying on timely basis with the company DC was agreed as 1/10, n/30. The terms 1/10, n/30 means the buyer is entitled to receive one percent of purchase discount on the purchases amount. The buyer will be entitled to the discount only if the payment is paid within ten days after provided invoice.
The amount calculated as purchase discount would be $36.
Calculations for the purchases amount:
The seller provides the trade discount of twenty percent and the fifteen percent on the list price to the buyer. The purchases amount to be recorded by the buyer would be at the invoice price.
The purchases amount that would be calculated is $2,980.
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