Special Journals: Purchases and Cash Payments, Page 8

Recording Transactions in Cash Payment Journal

The following transactions are recorded in a Cash Payment Journal. 

1. Recording cash merchandise purchases 
2. Recording a payment on account 
3. Recording other cash payments 
4. Recording payment of payroll 
5. Recording bank services charges 
6. Recording bankcard fees

Recording a Cash Purchase of Merchandise
 
Retail businesses purchase merchandise for resale. While they make most purchases on account, many purchases are made for cash.

The following example illustrates the steps to record a cash purchase of merchandise:

On January 19, Olympic Sports Wear purchased merchandise from Winner Athletics for $2,300, check No. 1002.

Steps to Record a Cash Merchandise Purchase: 

1. Enter the date of the transaction in the Date column. 
2. Enter the check number in the Document Number column. 
3. Enter the name of the account debited. 
4. Enter the amount of the debit in the General Debit column, as there is no special column for purchases. 
5. Enter the amount of the check in the Cash in Bank credit column.

After recording the transaction, the receipt for the cash purchase is filed. 

Recording a Payment on Account 

At times, companies offer a discount on some purchases. However, if a business cannot pay for the purchases within the discount period, they write a check for the full amount of the purchase.

The following example illustrates the steps to record a payment on account.

Rex Warehouse received $4,508 (less a discount deduction of $92) on January 15, for merchandise purchased on account, check No. 1003.

Steps to Record a Payment on Account: 

1. Enter the date of the transaction. 
2. Enter the check number. 
3. Enter the creditor’s name. 
4. Enter the amount of the original purchase in the Accounts Payable Debit column. 
5. Enter the amount of purchase discount. 
6. Enter the amount of the check in the Cash in Bank credit column.

Recording other Cash Payments

The following example illustrates the steps to record other cash payments:

On January 24, check No. 1004 for $375 was issued to Scott Delivery Services toward shipping charges on merchandise purchased from Sports Link Footwear.

Steps to record other Cash Payments: 

1. Enter the date of the transaction. 
2. Enter the check number. 
3. Enter the name of the account debited. 
4. Enter the amount in the General Debit column, as there is no special column for Transportation In. 
5. Enter the amount of the check.

Recording Payment of Payroll

When a business uses special journals, the entry for payment of the payroll is recorded in the Cash Payments Journal. The needed information is taken from the payroll register and is recorded in the payroll transaction.

The following example illustrates the steps to record a payment of payroll:

On December 31, Company A wrote check No. 1012 for $2,974 to pay the payroll amount of $4,000 (gross earning) for the pay period ending December 31.

The following amounts were withheld: Employees’ Federal Income Tax ($640), Employees’ State Income Tax ($80), Social Security ($248), and Medicare Tax ($58).


Steps to Record the payment of payroll: 

1. Enter the date of the transaction in the first line of the entry. 
2. Enter the check number. 
3. Enter the name of the account debited. 
4. Enter the amount of gross pay in the General Debit column. 
5. Enter the net pay in the Cash in Bank credit column. 
6. In the next four lines, enter the: 

• Account Name: Enter the names of the accounts credited. 
• General Credit: Enter the amount of each liability.

Recording Bank Service Charges

The amount for bank service charges is automatically deducted from the checking account. Although no check is written to pay these charges, the transactions are recorded in the Cash Payments journal, as the charges decrease the balance in the Cash in Bank account.

On January 31, Olympic Sports Wear recorded a bank service charge for $50 as indicated on the bank statement.

Steps to Record Bank Service Charges: 

1. Enter the date of the transaction. 
2. Enter the check number. 
3. Enter the name of the account debited. 
4. Enter the amount in the General Debit column, as there is no special column for Transportation In. 
5. Enter the amount of the check.

Recording Bankcard Fee

Most banks charge a fee for handling bankcard sales. The fee appears on the bank statement as a deduction from the checking account balance. The accounting clerk records this decrease in cash in the Cash Payment journal. The clerk makes an entry for the bank charges in the cashbook records.

On January 31, Olympic Sport Wear recorded bankcard fees of $100, in the bank statement.

Steps to Record Bankcard Fees: 

1. Enter the date of the transaction. 
2. Enter the check number. 
3. Enter the name of the account debited. 
4. Enter the amount in the General Debit column, as there is no special column for Transportation In. 
5. Enter the amount of the check.