Download Chapter Summary (continued) Purchases returns and allowances

CHAPTER TWELVE
INTRODUCTION TO
MERCHANDISING
BUSINESSES:
PURCHASES
12-3
INTRODUCTION TO MERCHANDISING
BUSINESSES: PURCHASES
Objectives:
1. Apply the procedure for checking the
accuracy of invoices.
2. Use an unpaid invoice file.
3. Explain the difference between FOB
shipping point and FOB destination.
4. Demonstrate the procedure for handling
purchases returns and allowances.
5. Compute purchases discounts.
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12-4
Purchasing Merchandise
Businesses that purchase
merchandise must have orderly
procedures for checking the
accuracy of invoices and for
making prompt payments.
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12-5
Transportation Charges
• When a business purchases
merchandise, it may be required to
pay transportation charges from
the supplier’s warehouse. These
charges are an added cost of the
merchandise.
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12-6
Purchase Returns and Allowances
• When a business returns goods
or receives an allowance, there
is a decrease in the cost of its
merchandise purchases.
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12-7
Purchase Discounts
• Cash discounts are called sales
discounts by the seller and
purchases discounts by the buyer.
The discounts apply to the cost of
merchandise only.
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12-8
Accounting Terminology
•Purchases returns and
allowances.
•Extensions
•FOB destination
•Sales discounts
•FOB shipping point
•Sales invoices
•Free on board
•Tickler file
•Purchase invoice
•Purchases discounts
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•Unpaid invoice file
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
12-9
Chapter Summary
• A purchase invoice is a bill that a
buyer receives for a purchase of
merchandise.
• Invoices must be paid within the
discount period to obtain the cash
discount.
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Accounting Fundamentals, 7/e
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12-10
Chapter Summary (continued)
• An unpaid invoice file is used to keep
track of due dates.
• FOB shipping point means that the
purchaser must pay the
transportation charges. FOB
destination means that the seller must
pay the transportation charges.
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Accounting Fundamentals, 7/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
12-11
Chapter Summary (continued)
• Purchases returns and allowances
decrease the cost of merchandise
purchased.
• A credit memorandum shows that
the supplier will reduce the
purchaser’s account balance by the
amount of the return or allowance.
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Accounting Fundamentals, 7/e
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12-12
Chapter Summary (continued)
• Purchases discounts apply only to
the cost of merchandise. They are
not allowed on transportation
charges, sales tax, or returns and
allowances.
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Accounting Fundamentals, 7/e
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
12-13
Topic Quiz
Answer the following true/false questions:
1. Purchases returns and allowances
increase the cost of merchandise
purchased.
2. Invoices must be paid within the
discount period to obtain the cash
discount.
FALSE
TRUE
3. A purchase invoice is a bill that a seller FALSE
receives for a purchase of merchandise.
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Accounting Fundamentals, 7/e
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12-14
Investigating on the Internet
Sources of information about purchases
can be accessed at various corporate
websites.
As a research assignment, access an
interesting website and report those
sources of information that might
concern purchases of merchandise.
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12-15
1. Purchases returns and allowances increase
the cost of merchandise purchased.
FALSE
Purchases returns and allowances
decrease the cost of merchandise
purchased.
McGraw-Hill/Irwin
Accounting Fundamentals, 7/e
(Return to Topic Quiz)
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
12-16
3. A purchase invoice is a bill that a seller
receives for a purchase of merchandise.
FALSE
A purchase invoice is a bill that a
buyer receives for a purchase of
merchandise.
McGraw-Hill/Irwin
Accounting Fundamentals, 7/e
(Return to Topic Quiz)
© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.