Inventory Systems Comparison

Periodic Inventory System Perpetual Inventory System

1. Sold merchandise on account costing P8,000 for P10,000; terms were 2/10, n/30:

Accounts Receivable 10,000 Accounts Receivable 10,000

Sales 10,000 Sales 10,000

Cost of Sales 8,000

Inventory 8,000

2. Customer returned merchandise costing P400 that had been sold on account for P500 (part of the
P10,000 sale):

Sales Returns & Allowances 500 Sales Returns & Allowances 500

Accounts Receivable 500 Accounts Receivable 500

Inventory 400

Cost of Sales 400

3. Received payment from customer for merchandise sold above [cash discount taken: (P10,000 sale –
P500 return) x 2% Discount= P190]:

Cash 9,310 Cash 9,310

Sales Discount 190 Sales Discount 190

Accounts Receivable 9,500 Accounts Receivable 9,500

4. Purchased on account merchandise for resale for P6,000; terms were 2/10, n/30 (recorded at invoice
price):

Purchases 6,000 Inventory 6,000

Accounts Payable 6,000 Accounts Payable 6,000

5. Paid P200 freight on the P6,000 purchase; terms were F.O.B. Shipping Point, freight collect:

Freight-in 200 Inventory 200

Cash 200 Cash 200

6. Returned merchandise costing P300 (part of the P6,000 purchase):

Accounts Payable 300 Accounts Payable 300

Purchase Returns & 300 Inventory 300

Allowance

7. Paid for merchandise purchased, refer to no. 4 [cash discount taken: (P6,000 purchase – P300 return) x
2% Discount = P114]:

Accounts Payable 5,700 Accounts Payable 5,700

Purchase Discounts 114 Purchase Discounts 114

Cash 5,586 Cash 5,586

8. To transfer the beginning inventory balance to the Income Summary account (part of the closing
entries under the periodic inventory system):

Income Summary 250,000 (No entry required)

Inventory, beg. 250,000

9. To transfer the ending inventory balance to the Income Summary account (part of the closing entries
under the periodic inventory system):

Inventory, end. 231,500 (No entry required)

Income Summary 231,500

10. To adjust the ending perpetual inventory balance for the shrinkage during the year:

Shrinkage already effected Cost of Sales 360

in the no. 9 entry Inventory 360