Nueva Vizcaya State University Instructional Module

Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY

Bambang, Nueva Vizcaya
INSTRUCTIONAL MODULE
IM No.:IM-ACCTG1-1STSEM-2020-2021
College: College of Business Education

Campus : Bayombong Campus
DEGREE PROGRAM BSBA COURSE NO. Acctg 1

SPECIALIZATION Financial Management COURSE TITLE Financial Accounting and Reporting
YEAR LEVEL 1ST Year TIME FRAME 12 HRS WK NO. 10-11 IM NO. 08
I. UNIT TITLE/CHAPTER TITLE: CHAPTER VIII
II. LESSON TITLE : COMPLETING THE CYCLE OF A MERCHANDISING BUSINESS
III. LESSON OVERVIEW

In this module, students will learn to prepare adjusting entries for a merchandising entity; prepare
accurately and in good form a ten-column worksheet; and prepare financial statements for merchandising
business.
IV. DESIRED LEARNING OUTCOMES:

At the end of the lesson, the students should be able to:
1. prepare adjusting entries for a merchandising entity;
2. prepare accurately and in good form a ten-column worksheet;
3. and prepare financial statements for merchandising business.
NEED FOR A PHYSICAL COUNT
In a periodic inventory system, purchases of merchandise are accumulated in the purchases account. During the
accounting period, no entry is made to the merchandise inventory account such that its balance at the end of the period,
before adjusting and closing entries, is the same as the beginning inventory. With no perpetual record of the cost of sales
during the period, the only way to obtain the cost of the ending inventory is to make a physical count.
It should be noted that the ending inventory amount is needed in the computation of the cost of sales. To recapitulate,
ending inventory is deducted from goods available for sale to obtain cost of sales. The steps involved in the physical count
follows:
a. All merchandise owned by the entity is counted.
b. The quantity counted is multiplied by the cost per unit for each inventory item.
c. The costs of various items are added to determine the total cost of inventory.
The resulting total cost of inventory is the ending inventory; this amount will appear as a deduction in the cost of sales
section of the income statement, and as a current asset in the balance sheet. The physical count is made at or near the
balance sheet date.
MERCHANDISE INVENTORY AT THE END OF THE PERIOD
At the end of the period, entries are made to reflect in the inventory account the ending balance. The objectives of these
entries are as follows:
a. To remove the beginning balance from the merchandise inventory account and to transfer it to income summary;
b. To enter the ending balance in the merchandise inventory account and to establish it in the income summary.
The attainment of the objectives is illustrated using the figures from Ricanitas Traders:
Merchandise Inventory
Jan. 1 Beginning Inventory 528,000 Dec. 31 Effect A (Beginning Balance) 528,000
Dec. 31 Effect B (Ending Balance) 483,000
Income Summary
Dec. 31 Effect A 528,000 Dec. 31 Effect B 483,000
In this example, merchandise inventory was P528, 000 at the beginning of the year and P483, 000 at the end of the year.
“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be
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Effect A removed the P528, 000 from the merchandise inventory account and transferred it to income summary. In income
summary, the P528, 000 is in effect added to net cost of purchases because, like expenses, the balance of the purchases
account is debited to income summary by a closing entry.
Effect B established the ending balance of merchandise inventory of P483, 000 and entered it as a credit in the income
summary account. The credit entry in income summary has the effect of deducting the ending inventory from goods
available for sale because both purchases and beginning inventory are entered on the debit side. To summarize,
beginning merchandise inventory and purchases are debits to income summary; while ending merchandise inventory is a
credit to income summary.
Thus, the objectives stated above are accomplished if effects A and B concurred. The question then arises as to how to
achieve these effects. Two acceptable methods are available – the adjusting entry method and the closing entry method.
Each method produces exactly the same result.
The Adjusting Entry Method
Using the adjusting entry method, the two entries indicated by effects A and B which are prepared at the time the other
adjusting entries are made as follows:
Dec. 31 Income Summary 528,000

Merchandise Inventory, Beginning 528,000
To remove beginning balance of merchandise
inventory and transfer it to income summary
Dec. 31 Merchandise Inventory, End 483,000

Income Summary 483,000
To establish ending balance of merchandise
inventory and deduct it from goods available for
sale in income summary.
The Closing Entry Method
The closing entry method makes the debit and the credit to merchandise inventory by including them among the closing
entries as follows:
Dec. 31 Income Summary xxx

Temporary Accounts with Debit Balances xxx
To close temporary accounts with debit balances
and to remove beginning inventory.
Dec. 31 Merchandise Inventory, End xxx

Temporary Accounts with Credit Balances
Income Summary 528,000
To close temporary accounts with credit balances
and to establish ending inventory.
PREPARING THE WORKSHEET
The worksheet of a merchandising business is the same as that of a service business except that it has to deal with the
new accounts related to merchandising transactions. These accounts include sales, sales returns and allowances, sales
discounts, purchases, purchases returns and allowances, purchases discounts, transportation in, merchandise inventory
and transportation out. The worksheet for Ricanitas Traders using the closing entry method is shown in Exhibit 8-1. Each
pair of columns in the worksheet, and the adjusting and closing entries are discussed as follows:
Trial Balance Columns. The first step in the preparation of the worksheet is to enter the balances from the ledger
accounts into the trial balance columns. The merchandise inventory account balance of P528, 000 is the cost of beginning
inventory.
Adjustment Columns. Under the closing entry method of handling merchandise inventory, the adjusting entries for
Ricanitas Traders are entered in the adjustments columns in the same way they were for service entities. These involve
insurance expired during the period (adjustment a); store and office supplies used (adjs. b & c); depreciation of building
and office equipment (adjs. d & e); accrual of interest expense (adj. f). No adjusting entry is made for merchandise
inventory because the closing entry method was used. After the adjusting entries are entered in the worksheet, the trial
balance columns and adjustment columns are totaled to prove the equality of the debits and credits.
Omission of Adjusted Trial Balance Columns. These two columns are used when there are many adjusting entries to
be considered. When only a few adjusting entries are required, as in this case, these columns are not necessary and may
be omitted.
Income Statement and Balance Sheet Columns. After the trial balance columns have been totaled, the adjustments
entered, and the equality of the columns proved, the balances are extended to the statement columns. Each account
balance is entered in the proper column of the income statement or balance sheet.
The extension of the beginning and ending inventory balances requires some new procedure.
 First, the beginning inventory balance of P528, 000 is extended to the debit column of the income statement
as illustrated in Exhibit 9-1. This procedure has the effect of adding beginning inventory to net cost of purchases;
observe that the purchases account is also in the debit column of the income statement.
 Second, the ending inventory balance of P483, 000 which is not in the trial balance is entered in the credit
column of the income statement. This procedure has the effect of subtracting the ending inventory from goods
available for sale. Note that two inventory amounts appeared in the income statement columns. This is because
both the beginning inventory and the ending inventory are needed in the computation of cost of sales.
 Finally, the ending inventory is also entered in the debit column of the balance sheet. After all the items have
been extended to the proper statement columns, the four columns are totaled. The profit or loss is determined as
the difference between the debit and credit columns of the income statement. In this case, Ricanitas Traders
earned a profit of P455, 210, which is extended to the credit column of the balance sheet. The four columns are
then added to prove the equality of debit and credits.
Ricanitas Traders
Worksheet
For the Year Ended Dec. 31, 20015
Trial Balance Adjustments Income Statement Balance Sheet
Account Title Debit Credit Debit Credit Debit Credit Debit Credit
Cash 304,500 304,500
Accounts
484,200 484,200
Receivable
Merchandise
528,000 528,000 483,000 483,000
Inventory
Store Supplies (b)
26,000 10,600
15,400
Office Supplies (c)
18,400 6,360
12,040
Prepaid Insurance (a)
13,800 4,600
9,200
Land 145,000 145,000
Building 202,600 202,600
Accumulated Dep.- (d)
56,500 82,500
Building 26,000
Office Equipment 86,000 86,000
Accumulated Dep.- (e)
28,000 50,000
Office Equipment 22,000
Accounts Payable 206,830 206,830
Salaries Payable 20,000 20,000
Interest Payable (f)
38,400
38,400
Long-term Notes
480,000 480,000
Payable
Ricanitas, Capital 593,920 593,920
Ricanitas,
200,000 200,000
Withdrawals
Sales 2,463,50 2,463,500
0
Sales Returns and
27,500 27,500
Allowances
Sales Discounts 42,750 42,750
Purchases 1,264,00
1,264,000
0
Purchases Returns
56,400 56,400
and Allowances
Purchases
21,360 21,360
Discounts
Transportation In 82,360 82,360
Sales Salaries
225,000 225,000
Expense
Office Salaries
171,000 171,000
Expense
Store Supplies (b)
15,400
Expense 15,400
Office Supplies (c)
12,040
Expense 12,040
Insurance Expense- (a)
5,600
Selling 5,600
Insurance Expense- (a)
3,600
General 3,600
Transportation Out 57,400 57,400
Utilities Expense 48,000 48,000
Depreciation Exp.- (d)
26,000
Building 26,000
Depreciation Exp.- (e)
22,000
Office Equip. 22,000
Interest Expense (f)
38,400
38,400
3,926,51 2,569,05 1,926,86
3,926,510 123,040 123,040 3,024,260 1,471,650
0 0 0
Profit 455,210 455,210
3,024,26 1,926,86
3,024,260 1,926,860
0 0
Exhibit 8-1 Worksheet for Ricanitas Traders (Closing Entry Method)
PREPARING THE FINANCIAL STATEMENTS
Income Statement
The discussion on the major parts of the income statement for a merchandising entity has been made in the previous
chapter. The statement may be prepared by referring to the income statement columns of the worksheet. Per revised PAS
No. 1, an enterprise should present an analysis of expenses using a classification based on either the nature of expenses
or their function within the entity, whichever provides information that is reliable and more relevant. Entities are
encouraged to present the analysis of expenses on the face of the income statement.
Nature of Expense Method
Expenses are aggregated or combined in the income statement according to their nature and are not reallocated among
various functions within the entity. This method is simple to apply in many smaller enterprises because no allocation of
operating expenses between functional classifications is necessary.
Function of Expense Method
This method, also referred to as the “cost of sales” method, classifies expenses according to their function as part of cost
of sales, distribution/selling, administrative and other operating activities. This presentation often provides information that
is more relevant to users than the nature of expense method but the allocation of costs to functions can be arbitrary and
involves considerable judgment. This method provides multiple classifications and intermediate differences to highlight
significant relationships.
In a merchandising business, net sales arise from the sale of goods while cost of sales or cost of goods sold represents
the cost of inventory the entity has sold to customers. The difference between net sales and cost of sales is called gross
profit.
Then, other operating income is added and operating expenses are deducted from the gross profit to arrive at operating
profit.
Investment revenues, other gains and losses, and finance costs are considered to arrive at profit before tax then income
tax expense is deducted to arrive at profit before tax then income tax expense is deducted to arrive at profit from
continuing operations. Finally, profit from discontinued operations (net of tax) is taken to account to get profit for the period.
Net Sales P xxx

Cost of Sales (xxx)
Gross Profit P xxx
Other Operating Income xx
Total P xxx
Operating Expenses
Distribution Costs P xx
Administrative Expenses xx
Other Operating Expenses xx (xx)
Operating Profit P xxx
Finance Costs (xx)
Investment Revenues xx
Profit from Continuing Operations P xxx
Profit From Discontinued Operations x
Profit P xxx
The difference between the two methods lies in the items above operating profit. The standard does not prescribe any
format. The choice between the two methods depends on historical and industry factors and the nature of the entity.
Exhibit 8-2 shows the income statement for Ricanitas Traders using the function of expense method:
Ricanitas Traders
Income Statement
Net Sales
Gross Sales P2,463,500
Less: Sales Returns &
P 27,500
Allowances
Sales Discounts 42,750 70,250
Net Sales P2,393,250
Cost of Sales
Merchandise Inventory, 1/1/15 P 528,000
Purchases P1,264,00
0
Less: Purchases Ret. & Allow. P 56,400
Purchases Discounts 21,360 77,760
Net Purchases P1,186,24
0
Transportation In 82,360
Net Cost of Purchases 1,268,600
Goods Available for Sale P1,796,600
Less: Merchandise Invty.,
483,000
12/31/15
Cost of Sales 1,313,600
Gross Profit P1,079,650
Operating Expenses
Selling Expenses
Sales Salaries P 225,000
Transportation Out 57,400
Store Supplies Expense 15,400
Insurance Expense-Selling 5,600
Total Selling Expenses P 303,400
Administrative Expenses
Office Salaries Expense P 171,000
Utilities Expense 48,000
Depreciation Exp.-Building 26,000
Depreciation Exp.-Office Equip. 22,000
Office Supplies Expense 12,040
Insurance Expense-General 3,600
Total Administrative Expenses 282,640
Total Operating Expenses 586,040
Operating Profit P 493,610
Finance Costs 38,400
Profit P 455,210
Exhibit 8-2 Income Statement (Using the Function of Expense Method)
Statement of Changes in Equity
Ricanitas Traders
Statement of Changes in Equity
W. Neis, Owner’s Equity, 1/1/15 P 593,920
Add: Profit 455,210
Total P 1,049,130
Less: Withdrawals 200,000
W. Neis, Owner’s Equity, 12/31/15 P 849,130
Exhibit 8-3 Statement of Changes in Equity
Balance Sheet
The balance sheet dated “Dec. 31, 2015” is implicitly understood to mean “at the close of business on Dec. 31, 2015.”
Ricanitas Traders
Balance Sheet
Dec. 31, 2015
Asset
Current Assets
Cash P 304,500
Accounts Receivable 484,200
Merchandise Inventory 483,000
Store Supplies 10,600
Office Supplies 6,360
Prepaid Insurance 4,600
Total Current Assets P 1,293,260
Non-current Assets
Land P 145,000
Building P 202,600
Less: Accumulated Depreciation 82,500 120,100
Office Equipment P 86,000
Less: Accumulated Depreciation 50,000 36,000 301,100
Total Assets P 1,594,360
Liabilities
Current Liabilities
Accounts Payable P 206,830
Salaries Payable 20,000
Interest Payable 38,400
Total Current Liabilities P 265,230
Non-current Liabilities
16% Notes Payable, Due on
480,000
6/30/16
Total Liabilities P 745,230
Owner’s Equity
Ricanitas, Capital, Dec. 31 P 849,130
Total Liabilities and Owner’s
P 1,594,360
Equity
Exhibit 8-4 Classified Balance Sheet
ADJUSTING AND CLOSING ENTRIES
The adjusting entries are journalized and posted to the ledger as they would be in a service entity. The closing entries for
Ricanitas Traders under the closing entry method appear in Exhibit 9-5.
Note that merchandise inventory is credited in the first entry for the amount of the beginning inventory, P528, 000; and
debited in the second entry for the amount of the ending inventory, P483,000. Except from the closing of the temporary
accounts typical of a merchandising business, the closing procedures are the same with that of a service business.
Exhibit 8-5
Closing Entries for Ricanitas Traders: Closing Entry Method
Journal
Page 1
Date Account Title and Explanation PR Debit Credit
2015
Dec. 31 Merchandise Inventory, End 483,000
Sales 2,463,500
Purchases Returns and Allowances 56,400
Purchases Discounts 21,360
Income Summary 3,024,260
To close temporary accounts with
credit balances and to establish the
ending merchandise inventory.
Dec. 31 Income Summary 2,569,050

Sales Returns and Allowances 27,500
Sales Discounts 42,750
Purchases 1,264,000
Transportation In 82,360
Sales Salaries Expense 225,000
Office Salaries Expense 171,000
Store Supplies Expense 15,400
Office Supplies Expense 12,040
Insurance Expense-Selling 5,600
Insurance Expense-General 3,600
Transportation Out 57,400
Utilities Expense 48,000
Depreciation Expense- Building 26,000
Depreciation Expense-Office Equipment 22,000
Interest Expense 38,400
To close temporary accounts with debit
balances and to remove beginning
inventory.
31 Income Summary 455,210

Ricanitas, Capital 455,210
To close the income summary
account.
31 Ricanitas, Capital 200,000

Ricanitas Withdrawals 200,000
To close the withdrawal account.
POST-CLOSING TRIAL BALANCE
A final trial balance is prepared to test the equality of the accounts after posting the adjusting and closing entries. This trial
balance is similar to the one discussed in the service business except for the addition of the merchandise inventory
account.
Ricanitas Traders
Post-Closing Trial Balance
Dec. 31, 2015
Cash P 304,000
Accounts Receivable 484,200
Merchandise Inventory 483,000
Store Supplies 10,600
Office Supplies 6,360
Prepaid Insurance 4,600
Land 145,000
Building 202,600
Accumulated Depreciation-Building P 82,500
Office Equipment 86,000
Accumulated Depreciation-Office Equipment 50,000
Accounts Payable 206,830
Salaries Payable 20,000
Interest Payable 38,400
Long-term Notes Payable 480,000
Ricanitas, Capital 849,130
P 1,726,860 P 1,726,860
V. LEARNING ACTIVITIES
A. Prepare the income statement using the function of expense method. In a separate schedule, show the
computation of Cost of Goods Sold.
Selected amounts from the accounting records of Winnie Villanueva Souvenirs are called in alphabetical order:
Accounts Receivable P48,300 Purchases P91,300

Accumulated Depreciation 18,700 Purchase Discount 3,000
Cost of Goods Sold ? Purchase Returns 2,000
Transportation In 2,200 Sales Discount 9,000
General Expenses 23,800 Sales Returns 16,000
Other Operating Expenses 1,500 Sales 301,000
Inventory, 6/30/2016 21,870 Distribution Cost 37,840
Inventory, 1/1/2016 19,450 Owner’s Equity 126,070
Unearned Revenues 6,500
VI. LESSON CONTENT
VII. ASSIGNMENT
A. PREPARING WORKSHEET, ADJUSTING AND CLOSING ENTRIES, AND FINANCIAL STATEMENTS
The ledger account of Linda Chua Company for the year ended Dec. 31, 2015 are as follows:
Accu. Depreciation-Off. Bldg 100,000 Notes Payable due in 2 years 200,000

Accu. Depreciation-Off. Equipment 150,000 Office Building 1,600,000
Accounts Receivable 136,000 Office Equipment 570,000
Accounts Payable 74,000 Office Supplies 42,000
Cash 72,000 Prepaid Advertising 75,000
Transportation In 72,000 Purchase Discounts 172,000
Insurance Expense 25,000 Purchase rets. & Allow. 133,000
Interest Expense 208,000 Purchases 2,643,000
Chua, Capital 1,510,000 Salaries Expense 862,000
Chua, Withdrawal 200,000 Sales Discounts 161,000
Land 400,000 Sales Returns and Allowa. 187,000
Merchandise Inventory 598,000 Sales 4,600,000
Mortgage Payable 1,100,000 Travel Expense 188,000
Additional Information:
a. Office supplies consumed during the year amounted to P17,000.
b. Advertising expense in the amount of P25,000 has expired during the year.
c. Salaries of P21,000 have accrued as at Dec. 31, 2013.
d. Depreciation on the office building and on the office equipment amounted to P15,000 and P20,000, respectively.
e. The Dec. 31, 2013 ending inventory is P723,000.
Required:
1. Prepare worksheet.
2. Prepare the financial statements.
3. Prepare the adjusting and closing entries.
General Journal
(Prepare the journal entries & Financial Statements using this journal.)
Date Description P.R Debit Credit
Date Description P.R Debit Credit
VIII. EVALUATION
A. TRUE OR FALSE. Write “T” if the statement is correct and “F” if incorrect.
1. On the worksheet of a merchandising company that uses the perpetual inventory system, the Merchandise
Inventory account balance is not adjusted.
2. When using the perpetual inventory system, the Merchandise Inventory account will not appear in the
closing entries.
3. The worksheet of a merchandising company that uses the perpetual inventory system will not have a
Transportation In account.
4. When preparing a worksheet for a merchandising company that uses the perpetual inventory system, the
cost of goods sold can be derived from the balances of several accounts in the Income Statement columns.
5. Under the perpetual inventory system, the ending merchandise inventory balance is closed at the same time
as Cost of Goods Sold.
6. When preparing a worksheet for a merchandising business that uses the periodic inventory system, the
merchandise inventory amount shown on the trial balance will be carried over to the Balance Sheet debit
column.
7. On the worksheet of a merchandising company that uses periodic inventory system, both Purchases and
Purchases Returns and Allowance appear in the Income Statement columns.
8. The Purchases account is closed to the Merchandise Inventory account.
9. The ending inventory amount appears in both Income Statement columns on the worksheet of a
merchandising company that uses the periodic inventory system.
10. Under the periodic inventory system, the Merchandise Inventory account appears in the closing entries
made at the end of the period.
B. Multiple Choice. Encircle the best answer.
1. A supplier offers the following discounts: Trade discount of 10% at list price and another cash discount of
5% if paid in full before the date. How much is to be paid if customer pays before due date at list price of
P16,000?
a. P13, 680 c. P15,520
b. P14,000 d. P16,000
2. A trade discount is
a. Shown in the sales journal. c. shown in the purchase journal
b. Shown in the general journal d. not shown anywhere
3. Which account does a merchandiser, but not a service entity, use?

a. Sales c. Inventory
b. Cost of Goods Sold d. All of the above
4. The two main inventory accounting systems are the following

a. Purchase and sale c. returns and allowances
b. Cash and accrual d. perpetual and periodic
5. Which of the following accounts is unique to a merchandising entity that uses the periodic inventory system?
a. Purchases c. Transportation In
b. Cost of Goods Sold d. Merchandise Inventory
6. The Merchandise Inventory account balance in the trial balance columns of a worksheet for a merchandising
entity that uses the periodic system
a. Appears in the credit column only
b. Appears in both the debit and the credit columns
c. Is correct as stated
d. Is the same as it was at the beginning of the period
7. The closing entries for a merchandising entity using the perpetual inventory system
a. Are the same regardless of inventory system used.
b. Are the fewer in number than if the periodic system were used.
c. Do not affect the Merchandise Inventory account.
d. Calculate the Gross Profit in the Income Summary account.
8. Which of the following accounts is closed by debiting the account?

a. Purchase Returns and Allowances c. Purchases
b. Sales Returns and Allowance d. Transportation In
9. Under the periodic system

a. Purchases of merchandise are accumulated in the Purchase account.
b. No entry is made to the Merchandise Inventory account during the accounting period.
c. The only way to obtain the cost of ending inventory is to make a physical count.
d. All of the above
10. MMB purchased Inventory for P50,000 and also paid a P3,000 freight bill. MMB returned half the goods to
the seller and later took a 2% purchase discount. What is MMB’s cost of the inventory that I kept?
a. P27,000 c. P28,000
b. P27,500 d. P25,000
IX. REFERENCES
Ballada, S. and Ballada, W. (2015). Accounting Fundamentals. Padre Campa St., Sampaloc, Manila:
Domdane Publishers & Made Easy Books
Ballda, W. (2015). Basic Accounting. Padre Campa St., Sampaloc, Manila: Domdane Publishers & Made
Easy Books
Beticon, J., Garcia, E., Ireneo, S., James,G.,(2013). Fundamentals of Accounting, Volume 1, (2013).
Lopez, R., (2015). Learning the Basics of ACCOUNTING (Simplified Procedural Approach-Near to Self-
teaching). Davao City, Philippines: MS LOPEZ Printing & Publishing
Macapilit, C., (2011). Worktext in Basic Accounting, Revised Edition(2011),

Sampaloc, Manila: Rex Bookstore Incorporated
Ong, Flocer Lao, (2012). Fundamentals of Accounting, Textbook for Beginners, Third Edition. South
Triangle Quezon City, Philippines: C & E Publishing, Inc.
Valencia, E. and Roxas, G. (2009). Basic Accounting Concepts, Principles, Procedures and Applications,
3rd Edition. Baguio City, Philippines: Valencia Educational Supply
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Republic of the Philippines

NUEVA VIZCAYA STATE UNIVERSITY

College: College of Business Education

DEGREE PROGRAM BSBA COURSE NO. Acctg 1

I. UNIT TITLE/CHAPTER TITLE: CHAPTER VIII

II. LESSON TITLE : COMPLETING THE CYCLE OF A MERCHANDISING BUSINESS

III. LESSON OVERVIEW

IV. DESIRED LEARNING OUTCOMES:

NEED FOR A PHYSICAL COUNT

MERCHANDISE INVENTORY AT THE END OF THE PERIOD

The Adjusting Entry Method

Dec. 31 Income Summary 528,000

Dec. 31 Merchandise Inventory, End 483,000

The Closing Entry Method

Dec. 31 Income Summary xxx

Dec. 31 Merchandise Inventory, End xxx

PREPARING THE WORKSHEET

Exhibit 8-1 Worksheet for Ricanitas Traders (Closing Entry Method)

PREPARING THE FINANCIAL STATEMENTS

Nature of Expense Method

Function of Expense Method

Net Sales P xxx

Exhibit 8-2 Income Statement (Using the Function of Expense Method)

Statement of Changes in Equity

Exhibit 8-3 Statement of Changes in Equity

Exhibit 8-4 Classified Balance Sheet

ADJUSTING AND CLOSING ENTRIES

Dec. 31 Income Summary 2,569,050

31 Income Summary 455,210

31 Ricanitas, Capital 200,000

POST-CLOSING TRIAL BALANCE

Accounts Receivable P48,300 Purchases P91,300

VI. LESSON CONTENT

A. PREPARING WORKSHEET, ADJUSTING AND CLOSING ENTRIES, AND FINANCIAL STATEMENTS

Accu. Depreciation-Off. Bldg 100,000 Notes Payable due in 2 years 200,000

B. Multiple Choice. Encircle the best answer.

3. Which account does a merchandiser, but not a service entity, use?

4. The two main inventory accounting systems are the following

8. Which of the following accounts is closed by debiting the account?

9. Under the periodic system

Macapilit, C., (2011). Worktext in Basic Accounting, Revised Edition(2011),

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