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Accounting Cycle For Merchandising Business
Accounting Cycle For Merchandising Business
Accounting Cycle For Merchandising Business
MERCHANDISING
BUSINESS
MERCHANDISING BUSINESS
• Business organization that is engaged
in buying and selling of merchandise
MERCHANDISE
• Goods or articles acquired by the
business that are intended for sale
• Merchandise inventories Include only
goods that are held for sale in the
normal course of business operations
• Examples: office supplies for sale are
inventories for National Book Store but
“office supplies” for UST
Merchandise Inventory
Merchandise Inventory – Beginning
• Goods available at the start of the
accounting period
• n/30
– The amount of the invoice is payable
within 30 days from the date of sale.
– One of the most common modes of
purchase
– No discount is given by the seller
TERMS OF SALES
• 2/10, n/30
– A discount of 2% is deducted from the
invoice price if paid within 10 days from
date of sale
– The gross invoice price is to be paid if
payment is made after the discount
period.
– Account should be paid in 30 days from
the date of sale
TERMS OF SALES
• COD
– Cash on Delivery
– The invoice price is to be paid upon delivery of
the product
TERMS OF SALES
• EOM
– End of month
– Account should be paid on or before the
end of the month of sale
TERMS OF SALES
• 2/10, EOM, n/60
– 2% discount is given if the customer
pays by the tenth of the month following
the month of sale
– Beyond this period, the full amount must
be paid within 60 days from the date of
sale
SHIPPING CHARGES ON
MERCHANDISE SOLD OR PURCHASED
• FOB Destination
– Free on Board up to destination.
– The seller pays for freight or
transportation
– The seller assumes the risk of loss while
the goods are in transit
– The seller debits “Freight Out” or
“Delivery Expense” account for this
CHART OF ACCOUNTS
• List of account titles used in recording
business transactions.
• Arranged in the ALPICE order
Chart of Account of a Merchandising
Business
Examples of Transactions Involving
Sale of Merchandise
The following transactions of Triple J Trading
occurred during the month of January 2009
January
3 - Triple J sold merchandise worth P20,000 to
Mr. Vargas. Terms: COD
3 - Sold merchandise worth P 30,000 to ABC Co.
Terms: P10,000 downpayment, balance: 2/10;
n/30
4 - Mr. Vargas returned defective merchandise
amounting to P300. A cash refund was given
to him.
Jan 5 - ABC Co. returned defective
merchandise amounting to P500.
6 - Sold merchandise to various customers –
P13,000. Paid freight charges amounting to
P400.
12 - Received full payment from ABC Co.
13 - Sold an old office table for P1,000. COD //
ACCOUNTING FOR PURCHASES
• PURCHASES
– Means goods bought for the purpose of
resale without any change in the
physical form
– Debited when goods are acquired on
cash basis or on account //
PURCHASE RETURNS AND
ALLOWANCES