Journalizing under

Perpetual Inventory
System
In recording SALES, there are two (2)
entries that must be prepared:
1st entry:
A/R or Cash XX
Sales XX
2nd entry:
Cost of Sales XX
Merchandise Inventory XX
 In recording SALES RETURN AND
ALLOWANCES, there must be two (2)
entries:
1st entry:
Sales Return & Allowances XX
A/R or Cash XX
2nd entry:
Merchandise Inventory XX
Cost of Sales XX
 In recording FREIGHT-IN, use the
account title Merchandise Inventory:
Periodic:
Freight-in XX
Cash XX
Perpetual:
Merchandise Inventory XX
Cash XX
 In recording PURCHASES, use the
account title Merchandise Inventory:
Periodic:
Purchases XX
Cash or A/P XX
Perpetual:
Merchandise Inventory XX
Cash or A/P XX
 In recording PURCHASE RETURN AND
ALLOWANCES, use the account title
Merchandise Inventory:
Periodic:
A/P or Cash XX
Purchase Return & Allow. XX
Perpetual:
A/P or Cash XX
Merchandise Inventory XX
 In recording PURCHASE DISCOUNT, use
the account title Merchandise Inventory:
Periodic:
A/P XX
Purchase Discount XX
Cash XX
Perpetual:
A/P XX
Merchandise Inventory XX
Cash XX
Use MERCHANDISE INVENTORY in
the following account titles:
 PURCHASES
 PURCHASE DISCOUNT
 PURCHASE RETURN AND ALLOWANCES
 FREIGHT-IN
Make two entries for the following:
 SALES
 SALES RETURN AND ALLOWANCES
Examples:
Jan 4 Bought merchandise on account from
ABM Co., P120,000. Term: 3/10, 2/20,
N/30 FOB Shipping point. Freight paid
was P500.
5 Returned P12,000 worth of merchandise
to ABM Co. for not conforming with
the order.
18 Paid ABM Co.
Feb 2 Sold merchandise on account to
Allen Ltd., P50,000. Term: 3/10, 2/20,
N/30. The cost of merchandise sold was
P40,000.
4 Returned P3,000 worth of merchandise
to Allen Ltd. for not conforming with
the order. The cost of the merchandise
returned was P2400
18 Collected payment from Allen Ltd.
Jul 1 Sold merchandise on account to
Shyre Ltd., P150,000. Term: 2/20, N/30.
The cost of merchandise sold was
P120,000.
3 Refunded Shyre Ltd for defective
merchandise, P4,000
15 Collected from Shyre Ltd.
Arrangement of accouArrangement of
accounts in the Trial Balance:
ASSET
LIABILITIES
EQUITY
INCOME
Sales
Sales Discount
Sales Returns and Allowances
Cost of Sales
Freight-out
EXPENSES