FABM 12 - Module 2

Fundamentals of
Accountancy, Business
and Management 2
MODULE 2
Prepared by:
Claudine B. Carcueva
Instructor
This module is made to ACADEMICALLY HELP and ENRICH the SCC-SHS students. Please DON’T REPLICATE without
proper permission and authorization.
Dear Student,
Panagdait sa tanang kabuhatan!
The success of this module lies in
your hands. This was prepared for you to
learn diligently, intelligently, and
independently. As you embark on this
new learning journey, have this material
as your map and compass in venturing
the world of Accounting.
–
Bon Voyage!
“An investment in
knowledge pays the best
interest.” Benjamin Franklin
STUDY SCHEDULE AND HOUSE RULES
Course Title: Fundamentals of Accountancy, Business and Management
Course Description: This is an introductory course in accounting, business and
management data analysis that will develop students’ appreciation of accounting as a
language of business and an understanding of basic accounting concepts and principles
that will help them analyze business transactions.
STUDY SCHEDULE
MODULE 2: ACCOUNTING FOR MERCHANDISING BUSINESS (January 18- February 8)
WEEK TOPIC Date Time
Week 1 Lesson 1 – Merchandise Inventory and Cost of Sales
Lesson 2 – Posting and Trial Balance
Week 2 Lesson 3 – Adjusting Journal Entries
Lesson 4 – Preparing Worksheet
Week 3 Lesson 5 – Financial Statements
MIDTERM EXAMINATION
The following guides and house rules will help you to be on track and complete the
module with a smile on your face.
1. Read and understand every part of the module. If there are some contents or tasks
which you find difficult to understand, try to re-read and focus. You may also ask help
from your family at home, if it doesn’t work, you may send a private message on my
Facebook account (Claudine B. Carcueva) or email with my Gmail account
claudine.carcueva@sccpag.edu.ph
2. Each module begins with an overview and a list of the topics you are expected to learn.
3. Before reading the module and working on the activities, answer the pretest first. Find
out how well you did by checking your answers against the correct answers in the
answer key.
4. At the end of each lesson try to reflect and assess if you were able to achieve the
learning objectives. Remember that you can always read again if necessary.
5. Learn to manage your time properly. Study how you can manage to work on this module
in consideration of your other modules.
6. Each module has worksheets where you can do all your activities. At the end of the
month, remove the worksheets and submit them to your teacher.
7. Have patience and do not procrastinate.
8. Practice the virtue of honesty in doing all your tasks.
9. Lastly, the activities in the module must be done by you and not by others. Your family
and friends may support and guide you but you must not let them do the work. DO
YOUR BEST AND GOD WILL DO THE REST.
CLAUDINE B. CARCUEVA
Instructor
Module 2
ACCOUNTING OF
MERCHANDISING
CONCERN (PT 1)
Module 2
Lesson 1 The Merchandise

Inventory and Cost of Sales
Learning Outcomes:
▪ Define the MERCHANDISE INVENTORY
▪ Understand the concept of Merchandise inventory, end
▪ Understand the concept of Merchandise inventory, beg
▪ Understand the concept of Cost of goods sold or Cost of sale
Content focus
MERCHANDISE INVENTORY
Merchandise Inventory – Beginning

• Goods available at the start of the accounting period
Merchandise Inventory - End

• Goods available or remain unsold at the end of the accounting period
COST OF SALES
The computation of the cost of the goods sold under periodic inventory system can be
calculated as follows:
Inventory (beginning of the year) ****
Add: Net Purchases ****
--------------------------
Cost of goods available for sale ****
Less: Inventory (end of the year) ****
-----------------------------
Cost of goods sold ****
Determining Cost of Goods Sold under the Perpetual Inventory System
The Cost of Goods Sold under the perpetual inventory system is determined by getting the
running balance in the general ledger of the account. Recall the previous discussion on posting
the journal entries to the general ledger. At any point in time, you can determine the cumulative
cost of goods sold under the perpetual inventory system because in this system a separate
general ledger for “Cost of Goods Sold” is maintained.
THE FLOW OF INVENTORY COSTS
Under the periodic inventory system, physical count is necessary to determine the ending
balance of merchandise inventory. After the count, the costs of these inventory items will be
computed. There are instances that the unit prices for merchandise purchased are different.
Consider this scenario:
Geo San is in the business of buying and selling canned sardines. On January 2020, Geo had
the following transactions:
1/1/16 Merchandise inventory on hand 1,000 cans @ PHP10/can PhP 10,000
1/10/16 Purchased 5,000 cans @ PHP11 /can 55,000

1/20/16 Purchased 4,000 cans @ PHP12/can 48,000
Total PhP 113,000
During the month of January the total sales in units is 7,000. Therefore, the ending inventory in
units is 3,000 cans of sardines (1,000+5,000+4,000-7,000). The problem now is the unit cost
that will be used to determine the value of the ending inventory. This is where the cost flow
assumption is needed.
The two most commonly used cost flow assumptions are:
• Average Cost
Using the above example, average unit cost is simply computed by dividing the total cost
(PHP113,000) by total quantities (1,000+5,000+4,000) 11,000. Average unit cost is PHP11.30
The cost of merchandise inventory ending is 3,000 x PHP11.30 = PHP33,900
• First in, First Out (FIFO)
As the name implies, FIFO involves the assumption that goods sold are the first units that were
purchased - that means the oldest goods on hand. Thus, the remaining inventory is comprised
of the most recent purchases.
Applying this to the problem above, the 7,000 units sold were taken from:
1,000 @ PHP10
5,000 @ PHP11
1,000 @ PHP12
———————-
7,000 units
Therefore, the ending inventory will come from the January 20 purchases: 3,000 @ PHP12 =
PHP36,000
Self-check
Name: _____________________________________________ Course & Year:

________Directions: Perform the tasks below. Provide your answers on the space
provided.
The partial trial balance of Leslie Flores Merchandising for the year ended December 31,20B is given
below:
Debit Credit
L. Flores, Capital P357,000
L. Flores, Drawing P 50,000
Sales 1,857,000
Sales Returns and Allowances 15,000
Sales Discounts 8,000
Purchases 950,000
Purchase Returns and Allowances 5,000
Purchase Discounts 3,000
Freight in 6,000
Freight out 2,000
Salesmen’s commission 45,000
Merchandise Inventory:
Beg- P 250,000 End – P 100,000
Questions:
1. How much is the net

sales?
2. How much is the net
purchases?
3. How much is the
delivered cost of
purchases?
4. How much is the cost of
goods available for
sale?
5. How much is the cost of
goods sold?
6. How much is the gross
profit?
7. How much is the profit?
COST OF GOODS SOLD
Merchandise Inventory, beg P
Purchases P
Less: Purchase Return and All. P
Purchase Discounts
Net Purchases
Freight in
Delivered Cost of Purchases
Goods Available for Sale
P
Less: Merchandise Invty, end
Cost of Sales or Cost of goods sold P
INCOME STATEMENT
SALES P
LESS: SALES RET. AND ALL.
SALES DISCOUNTS
P
NET SALES
LESS: COGS
GROSS PROFIT P
LESS: OPERATING EXP
COMISSION EXP
NET PROFIT P
Module 2 The Accounting Cycle- Merchandising Concern (Part 1)
Lesson 2-5
Learning Outcomes:
1. Understand the concept of Freight-in and Freight-out
2. Differentiate Freight-in from Freight-out
3. Identify the types of shipping used by Merchandising concern
4. Differentiate FOB shipping point from FOB Destination
Content Focus
COMPLETING THE ACCOUNTING CYCLE FOR A MERCHANDISING BUSINESS
Agila Merchandising, owned by Lito Agila, sells ready-to-wear shirts and dresses to its customers. It started its operations on January 1,
2020.
The company issues the following documents:
• Official Receipts - for all cash collections
• Charge Sales Invoice – for all sales on account
• Check Voucher – for all cash disbursements
This module is made to ACADEMICALLY HELP and ENRICH the SCC-SHS students. Please DON’T REPLICATE without proper permission and authorization.
Step 1 & 2 –Understanding and Journalizing the transactions
For the month of January 2020, the special journals of Agila are shown below:
1/21/2020 Joshua 9 3,125 3,125
1/22/2020 Joseph 10 4,510 4,510
1/24/2020 Jesper 11 2,080 2,080
1/28/2020 Nelcie 12 1,180 1,180
1/29/2020 Ryan 13 900 900
1/30/2020 Arlen 14 3,450 3,450
1/30/2020 Art 15 1,478 1,478
Total for January 2020 45,255 45,255
CASH RECEIPTS JOURNAL
Official
DATE DESCRIPTION Receipt Debit Credit Credit Debit
(PARTICULARS) No.
Cash Sales Account Sales Discount

Receivable
1/2/2020 Ana 1 1,000 1,000
1/4/2020 Maria 2 1,890 1,890
1/6/2020 Peter 3 1,289 1,289
1/7/2020 Jun 4 3,456 3,456
1/7/2020 Karen 5 1,290 1,290
1/8/2020 Jane 6 3,876 3,876
1/8/2020 May 7 4,561 4,561
1/10/2020 April 8 5,600 5,600
1/15/2020 PNSC 9 8,060 8,960 900
1/16/2020 Ana 10 4,235 4,235
1/17/2020 Juan 11 2,010 2,010
1/21/2020 Rafael 12 3,410 3,410
1/22/2020 Ray 13 893 893
1/23/2020 Te 14 1,250 1,250
1/24/2020 Geo 15 3,452 3,452
1/24/2020 Dax 16 2,102 2,102
1/25/2020 Angela 17 1,000 1,000
1/29/2020 Clyde 18 345 345
1/30/2020 Joseph 19 4,000 4,510 510
Total 53,719 38,307 16,822 1,410
PURCHASE JOURNAL
Date Account Title and Explanation Ref Charge Invoice or Sales Invoice Debit Credit
No. (from supplier)
1/2/2020 XYS Clothing SI 102 228,560 228,560
1/10/2020 RTW Super Store SI611 133,070 133,070
1/29/2020 Dresses Unlimited SI341 98,120 98,120
Total 459,750 459,750
CASH
DISBURSEMENTS JOURNAL
DESCRIPTION Check or
CREDIT DEBIT DEBIT DEBIT DEBIT DEBIT CREDIT
(PARTICULARS)
DATE Voucher
Supplies Advertising
Purch
Cash Accounts Rental Discount
No. Payable Salaries
Exp Exp
Exp
Exp
St Realty Rental for Jan-Feb

1/2/16 CV01 10,000 10,000
2020
1/5/16 Del Supplies- office supplies CV02 3,500 3,500
1/15/16 XYS Clothing- payment of CV03 220,000 228,560 8,560

account
1/16/16 Jean Guzman-salary Jan 1- CV04 7,500 7,500

15,
2020
1/16/16 Sonic Promo-Advertising CV05 4,800 4,800
1/25/16 Goldmic Supplies CV06 1,990 1,990
TOTAL 254,290 228,560 14,000 5,490 4,800 10,000 8,560
In addition to the above special journals, the company maintains a general journal. The General Journal had the following ent ries for January
General Journal
Date Account Title and Explanation Ref Debit Credit
1/2/16 Cash 500,000

Agila, Capital 500,000
To record initial investment of Agila
1/2/16 Transportation equipment 150,000
Additional Information:
• The delivery vehicle purchased in January 2, 2020 is estimated to be useful for 10 years with no residual or salvage value.
• A physical count of merchandise inventory was conducted on January 30, 2020. The cost of the inventory on hand was PHP438,700.
• On January 30, 2020, Agila received a statement of account from Gus Oil Center reflecting a total bill of PHP2,180, representing fuel purchases
on January 2020 that were still unpaid as of the said date.
Step 3 – Posting to the General Ledger. From the summary of transactions in the special journals and general journals, the entries will now be
posted in each general ledger account:
GENERAL LEDGER
Account: Cash Account No. : 1000
Date Item Ref Debit Credit Balance
1/2/16 Investment of owner 500,000 500,000
Purchase of Vehicle 150,000 350,000
From the Cash receipts Journal 53,719 403,719
From the Cash Disbursement Journal 254,290 149,429
GENERAL LEDGER
Account No. :
Account: Accounts Receivable 1200
From
the Sales Journal 45,255 45,255
From the Cash Receipts Journal 16,822 28,433
GENERAL LEDGER
Account: Transportation
Equipment Account No. : 1680
General Journal - Purchase of vehicle 150,000 150,000
GENERAL LEDG ER
Account: Accounts Payable Account No. : 2000
From the
Purchase Journal 459,750 (459,750)
From the Cash Disbursements Journal 228,560 (231,190)
Account No. : 3000
Account: Agila, Capital
Initial Investment – Gen Journal 500,000 ( 500,000)
GENERAL LEDGER
GENERAL
LEDGER
Account No. :
Account: Sales 4100
From the Sales Journal 45,255 ( 45,255)
From the Cash Receipts Journal 38,307 (83,562)
GENERAL
LEDGER
Account No. :
Account: Sales Discounts 4102
GENERAL
LEDGER
Account No. :
Account: Purchases 5100
Account: Purchase Discount Account No. : 5102
From the Cash Disbursement Journal 8,560 (8,560)
140
GENERAL LEDGER
Account: Salaries Expense Account No. : 6100
GENERAL LEDGER
Account: Supplies Expense Account No. : 6150
GENERAL LEDGER
Account: Advertising Expense Account No. : 6400
GENERAL LEDGER
Account: Rental Expense Account No. : 6300
141
Step 4 & 5– Prepare the unadjusted trial balance, and preparation of worksheet. The balances in the general ledger for each account will be
extended to the first two money columns of the worksheet.
The unadjusted trial of Agila is:
AGILA MERCHANDISING
Unadjusted Trial Balance
For the month ending January 30, 2020
ACCOUNT TITLE DEBIT CREDIT
Cash 149,429
Accounts Receivable 28,433
Merchandise Inventory 0-
Transportation Equipment 150,000
Accum. Deprn-Off Eqpt 0
Accounts Payable 231,190
Agila, Capital 500,000
Sales 83,562
Sales Discounts 1,410
Purchases 459,750
Purchase Discount 8,560
Salaries Expense 14,000
Supplies Expense 5,490
Advertising Expense 4,800
Rental Expense 10,000
Depreciation Expense 0
823,312 823,312
Step 6 – Prepare adjusting entries. Recall, the five basic sources of adjusting entries:
1. Depreciation expense
2. Deferred expenses or prepaid expenses
3. Deferred income or unearned Income
4. Accrued expenses or accrued liabilities
5. Accrued income or accrued assets
Identify transactions in the books of Agila that will require adjustments:
• Depreciation of transportation equipment purchased on January 2, 2020

Monthly Depreciation = (Cost – Salvage or Residual Value) / 120 months
= (150,000-0) / 120
= 1,250
Adjusting entry : Depreciation Expense 1,250
Accum. Deprn- Transpo Eqpt 1,250
• Deferred or Prepaid Expenses
In the cash disbursement journal, the rental payment made on January 2, 2020 is for the month of January and February 2020 am ounting to
PHP10,000. The entire amount was charged to rental expense which is not proper because one half (1/2) of the said paymen t is considered as an
advance payment of rental. Thus, an asset should be recognized. The adjusting entry is:
Prepaid Expenses 5,000

Note: With this entry, the correct rental expense of PHP5,000 and a prepaid expense of PHP5,000 (an asset account) are recognized.
• Accrued Expenses
On January 30, 2020, fuel expenses incurred amounting to PHP2,180 should be recorded as an expenses and liability. The entry to adjust is:
Fuel Expenses 2,180

Accrued Expenses 2,180
AGILA MERCHANDISING  
Worksheet 
Adjusted Trial
Unadjusted Trial Balance Adjustments Balance
ACCOUNT TITLE
DEBI
DEBIT CREDIT CREDIT DEBIT CREDIT
T
Balance Sheet Accounts
Cash 149,429 149,429 -
Accounts Receivable 28,433 28,433 -
Merchandise Inventory - - -
Prepaid Expenses 5,000 5,000 -
Transportation Equipment 150,000 150,000 -
Accum. Deprn-Off Eqpt 1,250 - 1,250
Accounts Payable 231,190 - 231,190
Accrued Expenses 2,180 - 2,180
Agila, Capital
500,000 - 500,000
- -
Income Statement Accounts - -
Sales 83,562 - 83,562
Sales Discounts 1,410 1,410 -
Purchases 459,750 459,750 -
Purchase Discount 8,560 - 8,560
Salaries Expense 14,000 14,000 -
Supplies Expense 5,490 5,490 -
Advertising Expense 4,800 4,800 -
Rental Expense 10,000 5,000 5,000 -
Depreciation Expense 1,250 1,250 -
Fuel Expenses 2,180 2,180 -
823,312 823,312 8,430 8,430 826,742 826,742
Step 7 - Preparation of Financial Statements. The first statement prepared is the income statement. All income statement accounts are
extended to the appropriate column. Using the periodic inventory system, the beginning balance of merchandise inventory account is also
extended to the debit side, while the result of the physical count to determine the ending inventory is reflected on the credit side. The total
debit and total credit are determined and if credit balance is higher than the debit side, the difference is added to the deb it side. The difference
is actually the income for the period. However, if the total debit side exceeds the total credit side, the difference is added to the credit side and
this is the net loss of the business. The statement of financial position is then prepared. All assets, liabilities and equity accounts are
extended. The ending merchandise inventory is extended to the debit side.
The worksheet for these two financial statements are presented below:
AGILA MERCHANDISING
Worksheet
Adjusted Trial Statement of Financial

Balance IncomeStatement Position
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
Balance Sheet Accounts
Cash 149,429 - 149,429 -
Accounts Receivable 28,433 - 28,433 -
Merchandise Inventory - - 438,700 438,700
Prepaid Expenses 5,000 - 5,000 -
Transportation Equipment 150,000 - 150,000 -
Accum. Deprn-Off Eqpt - 1,250 - 1,250
Accounts Payable - 231,190 - 231,190
Accrued Expenses - 2,180 - 2,180
Agila, Capital - 500,000 - 500,000
- -
Income Statement Accounts - -
Sales - 83,562 - 83,562
Sales Discounts 1,410 - 1,410 -
Purchases 459,750 - 459,750 -
Purchase Discount - 8,560 - 8,560
Salaries Expense 14,000 - 14,000 -
Supplies Expense 5,490 - 5,490 -
Advertising Expense 4,800 - 4,800 -
Rental Expense 5,000 - 5,000 -
Depreciation Expense 1,250 - 1,250 -
Fuel Expenses 2,180 - 2,180 -
493,880 530,822
————————> 36,942
Net Income 36,942
826,742 826,742 530,822 530,822 771,562 771,562
The proper format of the income statement and the schedule of cost goods sold of Agila for January 2020 are presented below:
AGILA MERCHANDISING
Schedule of Cost of Goods Sold
For the month ended January 30, 2020
Merchandise Inventory, Beginning -0-

Add: Purchases 459, 970
Less: Purchase Discount 8, 560 
——————————-
Cost of Goods Available for Sale 451, 190
Less: Merchandise Inventory, Ending (438, 700)
——————————-
Cost of Goods Sold 12,490
——————————-
AGILA MERCHANDISING
Income Statement
For the month ended January 30, 2020
GROSS SALES 83,562

Less: Sales Discounts (1,410)
———————————
NET SALES 82,152
Less: Cost of Goods Sold (see above schedule) (12,490)
———————————
GROSS PROFIT 69, 662
LESS: EXPENSES
Salaries Expense 14,000
Salaries Expense 5, 490
Depreciation Expense 1, 250
Fuel Expense 2, 180
——————————-
Total Expense 32, 270
——————————-
NET INCOME 36, 942
—————————— 
Step 8 – Closing Entries. The closing journal entries consist of the following:
• All of the nominal revenue accounts should be closed to the income summary account by a Debit to revenue and credit to income summary.
• All of the nominal expense and cost of goods sold accounts should be closed to the income summary by a Credit to expense and a debit to
income summary.
• The Merchandise Inventory, Beginning is closed to Income summary account by a debit to Income Summary and a credit to Merchandise
Inventory.
• The Merchandise Inventory, Ending is set up in the books by a debit to Merchandise Inventory, Ending and a credit to Income Summary. The
amount that will be used is the result of the physical count.
• The balance in the income summary account should now reflect the net income for the accounting period. The next journal entry should close
the income summary account to the equity or capital account. If there is a net profit this entry will be a debit to income summary and a credit to
owner’s capital account.
Once the closing journal entries have been entered into the general journal, the information should be posted to the general ledger. When this is
accomplished, all of the nominal accounts in the general ledger should have zero balances. To double check on this, we prepare another trial
balance based on the new balances in the general ledger. If we have any nominal accounts with positive balances, a mistake was made along the
way and will need to be corrected before proceeding to the next accounting period
The closing entries of Agila are:
Supplies Expense 5,490
Depreciation Expense 1,250
Fuel Expense 2,180
*To close nominal expense and cost of goods

sold account accounts
Merchandise Inventory, Ending 438,700
Income Summary 438,700
*To set up merchandise inventory ending
After these entries, the income summary account has a balance of:
Total Credits (82,152 + 438,700) = 520,852

Total Debit = 83,910
Net (credit balance) 36,942
The last closing entry is to close the balance of income summary to the capital account:
DATE ACCOUNT TITLE AND EXPLANATION REF DEBIT CREDIT
1/30/16 Income Summary 36, 942
Agila, Capital 36, 942
Self-check
Name: ________________________________________________________ Course & Year: ____________
Directions: Perform the tasks below.
(a) Prepare the journal entries under Periodic System
Chart of Accounts: Cash; Accounts Receivable; Merchandise Inventory; Accounts Payable;

Sales; Sales Returns & Allowances; Sales Discount; Purchases; Purchase Returns &
Allowances; Purchase Discount; Freight-in; Utilities Expense; Salaries Expense; Rent Expense;
P. Sako, Capital
After winning a lotto worth a million peso, Ms. Pina Sako decided to put up her own
merchandising business “PAPASA Commercial”. The following were the narrative transactions
of PAPASA Commercial for the month of December 20A:
Dec. 1- Mrs. Pina Sako invested the following: Cash amounting to P600,000 and Merchandise
inventory with a fair value of P200,000.
Journal Entry:
Dec. 5- Sold merchandise on account costing P20,000 for P35,000; terms were 2/10, N/30
Journal Entry:
Dec. 6- Customer returned the merchandise that had been sold on account for P2000.
Journal Entry:
Dec. 7- Received payment from customer for merchandise sold on December 5.
Journal Entry:
Dec. 10- Purchased on account merchandise for resale for P8,000; terms were 2/10, N/30
(purchases recorded at invoice price)
Journal Entry:
Dec. 11- Paid P200 freight on the 8,000 purchase; term FOB Shipping point.
Journal Entry:
Dec. 15- Return merchandise costing P500 (part of the 8000 purchase)
Journal Entry:
Dec. 18- Paid for merchandise purchased (refer to December 10 transaction)
Journal Entry:
Dec. 20- Paid the following expenses: Utilities- 5,000; Salaries- 3,000; and Rent- 2,000
Journal Entry:
(b) Post and foot the T-accounts
CASH ACCOUNTS RECEIVABLE MERCHANDISE INV. ACCOUNTS PAYABLE
SALES SALES RETURNS & ALL. SALES DISCOUNT PURCHASE RETURN & ALL.
PURCHASE DISCOUNT PURCHASES FREIGHT-IN UTILITIES EXPENSE
RENT EXPENSE SALARIES EXPENSE P. SAKO, CAPITAL
(c) Prepare the unadjusted trial balance
(d) Prepare the adjusting entries, based on the additional information
provided below:
1. A physical count of merchandise inventory was conducted on December 30, 20A.

The cost of the inventory on hand was PHP30,700
2. Unpaid salaries for part-time employees for the month of December worth 7,500
(e) Prepare the Income Statement and the Balance Sheet
------------------------------------------------------------- End of Lesson 5 ----------------------------------------------------------
REFERENCES:
DIWA, Fundamentals of Accountancy, Business, and Management 2 nd ed
Rafael M. Lopez Jr. (2020), Fundamentals of Accountancy, Business and Management 1 Wild,
J. (2009). Principles of Accounting 19th Ed. McGraw Hill Publishing.
Haddocl, M., Proce, J., & Farina, M. (2012). College Accounting: A Contemporary Approach,
2nd ed. New York: McGraw-Hill/Irvin
Valencia, E.G. & Roxas, G.F. (2010). Basic Accounting 3rd ed.
Mandaluyong City, Philippines: Valencia Educational Supply.

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Fundamentals of

WEEK TOPIC Date Time

Week 1 Lesson 1 – Merchandise Inventory and Cost of Sales

Lesson 2 – Posting and Trial Balance

Week 2 Lesson 3 – Adjusting Journal Entries

Lesson 4 – Preparing Worksheet

Week 3 Lesson 5 – Financial Statements

Lesson 1 The Merchandise

Merchandise Inventory – Beginning

Merchandise Inventory - End

Determining Cost of Goods Sold under the Perpetual Inventory System

THE FLOW OF INVENTORY COSTS

1/1/16 Merchandise inventory on hand 1,000 cans @ PHP10/can PhP 10,000

1/10/16 Purchased 5,000 cans @ PHP11 /can 55,000

Total PhP 113,000

The two most commonly used cost flow assumptions are:

• First in, First Out (FIFO)

Name: _____________________________________________ Course & Year:

1. How much is the net

LESS: OPERATING EXP

COMPLETING THE ACCOUNTING CYCLE FOR A MERCHANDISING BUSINESS

The company issues the following documents:

• Official Receipts - for all cash collections

• Charge Sales Invoice – for all sales on account

• Check Voucher – for all cash disbursements

1/22/2020 Joseph 10 4,510 4,510

1/24/2020 Jesper 11 2,080 2,080

1/28/2020 Nelcie 12 1,180 1,180

1/29/2020 Ryan 13 900 900

1/30/2020 Arlen 14 3,450 3,450

1/30/2020 Art 15 1,478 1,478

Total for January 2020 45,255 45,255

Cash Sales Account Sales Discount

1/2/2020 Ana 1 1,000 1,000

1/4/2020 Maria 2 1,890 1,890

1/6/2020 Peter 3 1,289 1,289

1/7/2020 Jun 4 3,456 3,456

1/7/2020 Karen 5 1,290 1,290

1/8/2020 Jane 6 3,876 3,876

1/10/2020 April 8 5,600 5,600

1/15/2020 PNSC 9 8,060 8,960 900

1/16/2020 Ana 10 4,235 4,235

1/17/2020 Juan 11 2,010 2,010

1/21/2020 Rafael 12 3,410 3,410

1/22/2020 Ray 13 893 893

1/23/2020 Te 14 1,250 1,250

1/24/2020 Geo 15 3,452 3,452

1/24/2020 Dax 16 2,102 2,102

1/25/2020 Angela 17 1,000 1,000

1/30/2020 Joseph 19 4,000 4,510 510

Total 53,719 38,307 16,822 1,410

No. (from supplier)

1/2/2020 XYS Clothing SI 102 228,560 228,560

1/10/2020 RTW Super Store SI611 133,070 133,070

1/29/2020 Dresses Unlimited SI341 98,120 98,120

Total 459,750 459,750

St Realty Rental for Jan-Feb

1/5/16 Del Supplies- office supplies CV02 3,500 3,500

1/15/16 XYS Clothing- payment of CV03 220,000 228,560 8,560

1/16/16 Jean Guzman-salary Jan 1- CV04 7,500 7,500

1/25/16 Goldmic Supplies CV06 1,990 1,990

TOTAL 254,290 228,560 14,000 5,490 4,800 10,000 8,560