WEiPhones

BUY SALE
TRANSACTIO Galore TRANSACTIO
N N

BUYS SELL
S
 SUMMARY OF DIFFERENCES of SERVICE
CONCERN and MERCHANDISING CONCERN
Sales
Sales discount Sale
Transaction
Sales returns and allowances
Freight-Out
Merchandise Inventory, beg
Purchases
Freight-In
Purchase discount Buy
Transaction
Purchase returns and allowances
Merchandise Inventory, end
 ISSUES: SALE TRANSACTION

Type of Sale (Cash Sales or Sales on Account)

Inventory System (Periodic or Perpetual)

Returns and Allowances

Freight

Discount
 TYPES OF
SALE

ADVANCE
CASH CREDIT PAYMENT
Cash is PAID Cu s to mers are Customers pay
when the SALE is given a period of the seller in
made and the time after th e advance
g o o d s a r e sale is made to
delivered to the pay the SALE
customer. Gives rise to
LIABILITY
ENTRY
Dr Cash
Gives rise to Gives rise to Cr Advances
SALES SALES from
ACCOUNTS USED ACCOUNTS USED
Sale Sale
Sales Discount Sales Discount
Sales Returns Sales Returns
Sales Allowances Sales Allowances
Freight-Out Freight-Out
Cost of Sales
 PURCHASE OF GOODS
TRANSACTION: B Company sold goods to Mr. A, P100,000

B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Cash P100,000
Sales P100,000
Cash sales of goods

B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Accounts Receivable P100,000

Sales P100,000
Sale of goods on account
 ISSUES: SALE TRANSACTION

Type of Sale (Cash Sales or Sales on Account)

Inventory System

Returns and Allowances

Discount

Freight
Sales Returns: Sales Sales Allowances: This refers to a
returns occur when a situation where the buyer keeps the
buyer returns goods to goods but the seller reduces the amount
a seller. The reasons that the buyer owes, often because
for this can be varied: there’s a minor problem with the goods.
t h e go o ds co u ld b e Fo r example, i f a b u y er recei v es a
damaged, they might shipment of shirts and some of them
not be what the buyer have minor defects, the seller might give
ordered, or they might the buyer an allowance (i.e., a reduction in
not meet the buyer’s the price) rather than going to the trouble
quality standards. and expense of having the shirts returned
 RETURNS and ALLOWANCES
TRANSACTION: B Company sold goods to Mr. A, P100,000, of
which 25% have been returned due to spoilage.
B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Sales Returns and Allowances P25,000

Cash P25,000
Return of goods from cash sales
B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Sales Returns and Allowances P25,000

Accounts Receivable P25,000
Return of goods sold on account
 ISSUES:SALE TRANSACTION

Type of Sale (Cash Sales or Sales on Account)

Inventory System

Returns and Allowances

Freight

Discount
 ISSUE: Who pays
and records the
FREIGHT
FREIGHT IN

FREIGHT
OUT
ISSUE: Who pays
and records the
FREIGHT
 ISSUE: Who PAYS the FREIGHT?
RESOLUTION: General Rule: The OWNER PAYS the
FREIGHT
ISSUE: Who OWNS the GOODS
RESOLUTION: The possessor owns the goods
IF IN TRANSIT: If FOB Shipping Point, BUYER owns the
goods
If FOB destination, Seller owns the goods
ISSUE: Can the NON-OWNER buyer or seller PAYS the
freight?
RESOLUTION: YES
ISSUE: Who records the FREIGHT?

RESOLUTION: The OWNER, regardless of who pays.

TRANSACTION: B Company sold goods to Mr. A, P100,000, of
which 25% have been returned due to spoilage. Freight paid
amounted to P1,000.

B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Freight Out P1,000

Cash P1,000
Freight is paid by the seller
GENERAL RULE: The OWNER PAYS and RECORDS the freight.

BUYER OWNS THE SELLER OWNS THE

GOODS GOODS
GENERAL RULE: The OWNER PAYS and RECORDS the freight.

FREIGHT FREIGHT
PREPAID COLLECT

FOB Shipping Point: BUYER OWNS THE GOODS

 FOB Shipping FOB Shipping
Point-FREIGHT Point-FREIGHT
COLLECT PREPAID
BUYER OWNS THE GOODS

JOURNAL ENTRY of the SELLER

Dr. Accounts Receivable

No Entry Cr. Cash
 ACCOUNTING FOR FREIGHT
PERIODIC INVENTORY SYSTEM

FOB SHIPPING POINT, FREIGHT Buyer is the Owner.

COLLECT Buyer pays the freight.
TRANSACTION: B Company sold goods to Mr. A, P100,000, of
which 25% have been returned due to spoilage. Freight paid
amounted to P1,000.
B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

No Entry
 ACCOUNTING FOR FREIGHT
PERIODIC INVENTORY SYSTEM

FOB SHIPPING POINT, FREIGHT Buyer is the Owner.

PREPAID Seller pays the freight.
TRANSACTION: B Company sold goods to Mr. A, P100,000, of
which 25% have been returned due to spoilage. Freight paid
amounted to P1,000.
B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Accounts Receivable P1,000

Cash P1,000
To record freight paid by the
seller
GENERAL RULE: The OWNER PAYS and RECORDS the freight.

FREIGHT FREIGHT
PREPAID COLLECT

FOB Destination: SELLER OWNS THE GOODS

FOB Destination- FOB Destination-
FREIGHT FREIGHT
PREPAID COLLECT

SELLER OWNS THE GOODS

JOURNAL ENTRY of the SELLER

Dr. Freight Out Dr. Freight Out

Cr. Cash Cr. Accounts
Receivable
 ACCOUNTING FOR FREIGHT
PERIODIC INVENTORY SYSTEM

FOB DESTINATION, FREIGHT Seller is the Owner.

PREPAID Seller pays the freight.
TRANSACTION: B Company sold goods to Mr. A, P100,000, of
which 25% have been returned due to spoilage. Freight paid
amounted to P1,000.
A COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Freight Out 1,000

Cash 1,000
 ACCOUNTING FOR FREIGHT
PERIODIC INVENTORY SYSTEM

FOB DESTINATION, FREIGHT Seller is the Owner.

COLLECT Buyer pays the freight.
TRANSACTION: B Company purchased goods from Mr. A,
P100,000, of which 25% has been returned in a later date due to
spoilage. Freight paid amounted to P1,000.
A COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Freight Out P1,000

Accounts Receivable P1,000
To record payment of freight
 ISSUES: SALE TRANSACTION

Type of Sale (Cash Sales or Sales on Account)

Inventory System

Returns and Allowances

Freight

Discount
Example of credit term with trade
and cash discount:
Term: 15, 10, 5, 5/10, 2/5, n/30

Trade
Cash Discount
Discount
Assuming a List Price of P100,000 and
Terms of: 15, 10, 5, 5/10, 2/5, n/30.
What is the Final Price?
List Price P100,000
Less: First trade discount (P100,000 x 15%) 15,000
New List Price P 85,000
Less: Second trade discount (P85,000 x10%)
8,500
New List Price P 76,500
Less: Third trade discount (P76,500x5%) 3,825
Final Price P 72,675
 CREDIT TERM
DAT
E
5/10, 3/15, 1/20, N/30
10 5 5 10
DAYS DAYS DAYS DAYS

Jan 5 Jan 15 Jan 20 Jan 25 Feb 4

5 3 1
% % %
 PURCHASE ON
PERIODIC
ACCOUNT
TRANSACTION:
B Company SOLD, on account, goods to Mr. A at a list
price of P100,000. Terms: 10, 5, 2/10, n/30
List Price P
100,000
Less: First trade discount (P100,000x 10%)
10,000
New List Price P
90,000
Less: Second trade discount (P90,000x5%)
4,500
Final List Price P
85,500
 PURCHASE ON
PERIODIC
ACCOUNT
TRANSACTION:
B Company SOOLD, on account, goods to Mr. A at a list
price of P100,000. Terms: 10, 5, 2/10, n/30

B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Accounts Receivable P85,500

Sales P85,500
To record sales on account
PERIODIC PAYMENT WITHIN DISCOUNT PERIOD

B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Cash P83,790
Sales Discount 1,710
Accounts Receivable P85,500
Collection with discount period

PERIODIC PAYMENT BEYOND DISCOUNT PERIOD

B COMPANY
GENERAL JOURNAL
Page 1
DATE PARTICULARS PR DEBIT CREDIT

Cash P85,500
Accounts Receivable P85,500
Collection beyond discount period