Merchandising Operations

Merchandiser – A person who buys and sells goods or merchandise.

Merchandise Inventory – refers to goods purchased for resale in the normal
course of business.

- Stocks of goods held for sale that a merchandiser needs to maintain.

Gross Profit – Indicates adequacy of margin of profit set up by the merchandiser.

Equation:
Revenue
Less: Cost of Goods Sold
Equals: Gross Profit
Operating Profit – Profit from a firm's core business operations, excluding
deductions of interest and tax.

- Lahat ng cash na cinollect mo, minus lahat ng cash na ginamit sa expenses

Perpetual Method – records continuously the movement of the merchandise and

shows inventory balance at any point of time.
Periodic Method – adapted by the businesses selling low price – high volume
goods such as the goods sold in a supermarket, hardware store, or drugstore where
it is difficult to track down every cost of merchandise sold if done manually.

- Ito yung maramihang pagbenta sa maliit na halaga pero mahirap i-monitor

ang bilang.
Inventory Count – usually supervised by the staff of Internal Auditor who affixes
signature on inventory count sheet to confirm the count that was made.

- help you to keep on top of your inventory movements and identify any
discrepancies faster.
Cost of Goods Sold – a direct cost attributable to the production of the goods sold
in a company.
- cost ng merchandise na wala pang interes.
Equation:
Beginning Inventory
Add: Purchases
Less: Ending Inventory
Equals: COGS
Cost of Sales - yan yung nagastos mo para ibenta yung merchandise.
Sales Revenue – earned when the merchandiser transfers the goods to the
customer.
Equation:
Number of Units Sold
x Average Sales Price per Unit
Equals: Sales Revenue
Or
Total Sales
Less Output Tax
 Equals: Sales Revenue
Sales Discount – a reduction taken by a customer from the invoiced price of goods
or services, in exchange for early payment to the seller
Two Common Discounts Granted to Customers:
 Trade Discounts
 Cash Discounts
Trade Discounts – a percentage reduction from a published list price may be
granted to retailers or wholesalers for buying large quantities of goods or for
regularly patronizing the business
Cash Discounts – meant to encourage a customer to pay immediately, speed up
the seller’s cash inflow and allow him to use the cash for another profitable
operating cycle.

- Also known as sales discount, is a contra account which is recorded on the

debit side.
Note: Usual credit terms which appear on the invoices:
n/30 – the gross amount is payable within 30 days from the date of sale.
2/10, n/30 – account is payable within 30 days with a 2% discount given if
the account is paid within 10 days from date of sale.
3/EOM, n/60 – account is payable within 60 days with a 3% discount given if
the account is paid until the end of the month from the date of sale.
2/10, 1/15, n/30 – account is payable within 30 days with a 2% discount
given if the account is paid within 10 days from the date of sale, but only 1%
discount if the account is paid after days but within 15 days from the date of
sale.
Sales Returns and Allowances – a contra revenue account and is recorded on
the debit side.
Net Sales – the sum of a company's gross sales minus its returns, allowances, and
discounts.
Formula to find the Net Sales:
Sales/Sales Revenue
Less: Sales Discounts
Sales Returns and Allowance
Equals: Net Sales
Purchases – represents a decrease in owner’s equity account for cost of good
expense.
Freight In (FOB Shipping Point) – the title of ownership passes to the buyer as
soon as seller turns over the goods to a common carrier such as a cargo ship for
delivery of the goods to the buyer.

- The buyer is responsible to pay for the freight.

Freight Out (FOB Destination) – the seller is liable for the freight and is still
considered the owner of the goods until it reaches the buyer.
Purchase Returns and Allowances – credited with a corresponding debit to
accounts payable if it was purchased on credit.
Purchase Discount – a deduction that a company may receive if the supplier
offers it and the company pays the supplier's invoice within a specified period.

- A discount that is recorded by debiting the liability and crediting the

 purchases account called Purchase Discount.
Two Common Discounts Granted to Customers:
 Trade Discounts
 Cash Discounts
Trade Discount – given to the buyer to immediately deducted from the list price
and only at the balance appears in the invoice.
Cash Discount – only offered when one buys on account and is granted and
recorded only when the account is paid within the discount period.
Operating Expenses – an expense a business incurs through its normal
business operations.

- include rent, equipment, inventory costs, marketing, payroll, insurance, step

costs, and funds allocated for research and development.
Net Cost of Purchases:
Purchases
Add: Freight In
Equals: Cost of Goods Delivered
Less: Purchase Returns and Allowances
Purchase Discount
Equals: Net Cost of Purchases
Value Added Tax (VAT) – levied by the government to certain providers of goods
and services.
Note: kelangan alisin muna yung VAT kapag sinabi na VAT inclusive ang
lahat ng sales, purchases, at freight.
Input Tax – Each time a purchase is made, and a 12% VAT is included, buyer pays
2 items-cost of the merchandise purchased and the tax.
purchases: input tax
if vat inclusive: / 1.12 x .12
if vat exclusive: x .12

- sa purchases need mo pa idetermine kung ung binigay sayo na price ni

supplier is may vat na or wala pa.
- the account used pag bumili ng something or ng service.

Output Tax – each time a sale of good or service is made by a VAT registered
business or practitioner, a 12% VAT is charged to the customer or client increasing
the amount to be collected which is credited to the title Output Tax.
- account used pag nagbenta ka.
sales: output tax
x.12
- sa sales usually exclusive pa yankasi sayo manggagaling vat
Inclusive – is presumed to be already included in the tax base amount. Such
amount representing the taxable base (inclusive of vat), whether invoice sales price
or invoice gross receipts, is multiplied (12/112) vat factor.
P - Purchase
I - Input Tax
S - Sales
O Output Tax
Sales Journals -
Purchase Journals -
Cash Disbursement Journals -
Cash Receipts Journals
General Journal
Subsidiary Ledger