Financial Accounting Season 6 Episode 7 Purchase Journal Merchandising Co.

All financial transactions performed by a business should be accurately recorded and stored for future reference. One of the most important documents that every organization must maintain is the Purchase Journal. It is a record of all the purchases made by a business on credit.

The 7th episode of the sixth season of Financial Accounting is named Purchase Journal Merchandising Co. The episode dives deep into the concept of Purchase Journal, how it is filled out, how it relates to Accounts Payable and Inventory accounts. It also focuses on the accounting principles and methods that should be adhered to while making entries in the Purchase Journal.

The episode begins with an introduction to the Purchase Journal, its importance, and how the Merchandising Co. fills it out. The host explains that the purchase journal is a chronological record of all credit purchases made by the company. It contains detailed information such as the date of the purchase, the supplier's name, the items or services purchased, quantity, unit price, total cost, etc. The host also goes on to explain that the purchase journal should always match the supplier's invoice, and any discrepancies should be resolved immediately to avoid future conflicts.

The episode then moves on to discuss the various accounts that are impacted while making entries in the Purchase Journal. The host explains how the Purchase Journal entries relate to the accounts payable account, which is a liability account and how it is reflected on the balance sheet. He also describes how the inventory account is linked to the Purchase Journal and how it affects the Cost of Goods Sold (COGS) account.

As the episode progresses, the host provides examples of how the Purchase Journal entries are made, and how the complete journal is managed. He explains that there is a separate Purchase Journal page for each supplier, and each page is totaled at the end of the month to record the total amount of purchases made from that supplier. He also notes that the Purchase Journal should be reconciled with the General Ledger account at the end of each month to ensure that all entries are accurate.

The episode also tackles the topic of GST/HST/QST, a value-added tax in Canada. The host explains how GST/HST/QST affects the Purchase Journal and the accounts linked to it. He notes that the taxes paid on purchases made on credit will be claimed as Input Tax Credits (ITCs) that can reduce the amount of taxes that must be paid to the government.

Finally, the host discusses the importance of maintaining an accurate Purchase Journal. He explains that the Purchase Journal is a legal document and can be requested for audit purposes. Therefore, it is important to ensure that all entries made in the Purchase Journal are accurate and complete.

In conclusion, this episode provides a comprehensive understanding of the Purchase Journal, its importance, and the accounting principles that should be followed while making entries. It provides valuable insights to accounting professionals and business owners who want to enhance their financial acumen and ensure accuracy in their books.