DUTY 4

ANALYZING, JOURNALIZING, AND POSTING BUSINESS TRANSACTIONS

FOR A MERCHANDISING BUSINESS

General objective: At the end of this duty, you will be able to perform the recording
phase of the accounting cycle for a merchandising business. To complete this duty, you
need 54 hours.

Task 1: Analyzing Business Transactions.

Specific objective: At the end of this task, you will be able to analyze business
transactions of a merchandising business according to the required steps. To complete
this task, you need 9 hours.

To begin, find a quiet place to do your assignments, take your notebook, and a pen or a
pencil to write important points. Before proceeding, please once again read the specific
objective of this task.

Assignment
With the specific objective in mind, read your textbook on pages 147 – 185. Specifically,
you are acquired to read and understand about the following points:
- Accounting terms related to merchandising business such as merchandise (page
148), purchase invoice (154 ), purchases (page 151), markup or markdown (page
152), cost of merchandise (page 151), purchase on account (page 154), purchase
invoice (page 1543), charge customer (page 172), sales tax (page 172), cash
register (page 174), sales on account (page 175), charge or credit sale (page 175)
and the like.
- Principles of debit and credit for balance sheet and income statement accounts
(pages 151 & 171).
- How to analyze purchase and sale of merchandise for cash and on account (pages
147 – 185)

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Besides, read the following important tips:

Tips
There are six divisions of accounts for a merchandising business. Their divisions and
rules of debits and credits are summarized below:

S.N Division Balance side Side opposite the balance side

(Increase side) (Decrease side)
I Assets Debit Credit
II Liabilities Credit Debit
III Owner’s equity Credit Debit
IV Revenues Credit Debit
V Cost of merchandise
Purchases Debit Credit
Transportation-In Debit Credit
Purchases Return & allow. Credit Debit
Purchase discount Credit Debit
VI Expenses Debit Credit

Note that although owner’s drawing account is a capital account, its balance side is debit.
You are advised to read pages 147 – 185 again and again.

Test
After reading the above portion, attempt the following questions on a separate sheet.
1. Check your progress exercise 1 on page 149
2. Check your progress exercise 3 on page 152
3. Check your progress exercise 4 on page 157
4. Check your progress exercise 5 on page 166.

After doing all of the above exercise, evaluate your performance by comparing your
answer with the answers to Check Your Progress Questions on pages 167 – 168. If you
scored less than 75% on each exercise, go back and read pages 147 – 167 and then

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attempt the exercise again. Now if your performance is ok, go to the following
assignments.

Attempt the model examination questions from your textbook on pages 169 – 170.
If you are satisfied with what you have done on the previous two tests, attempt the
following questions.
1. Check your progress exercise 1 on page 173
2. Check your progress exercise 2 on page 180

After doing the above exercise, evaluate your performance by comparing your answer
with the Answers to Check Your Progress Exercise on page 185. If you scored below
75% on each exercise, read again pages 171 – 185 and then attempt the exercises again.

Now if you are comfortable with your performance, attempt model examination questions
on pages 186 – 189.

Task 2 – Journalizing Business Transactions in a combination journal.

Specific objective: At the end of this task, you will be able to journalize business
transactions in a combination journal. To complete this task you need 12 hours.

To begin, find a quiet place to do your assignments, take your notebook, and a pen or
pencil to write important points. Please once again read the specific objective of this task
before proceeding.

Assignment
To accomplish the specific objective of this task, read your textbook pages 149 – 150,
and page 184. Specifically, you are expected to know about the following points:
- Format of combination journal (page 149 & page 184).
- Journalizing purchases of merchandise and cash payment transactions in a
combination journal.
- Journalizing sales of merchandise and cash receipts transactions in a combination
journal.

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Test 1
After reading about the above points, attempt the following questions on a separate paper.
1. Check your progress exercise 2 on page 151
2. Model Examination Questions (part I, No. 2, 4, & 5) on page 186, & part II (No.
2, & 3).

To evaluate your performance, compare your answer with the Answers to Check Your
Progress questions on page 185.

Test 2
If you think you are successful in the performance of test 1, attempt problem 1 &
problem 2 on page 188.

Task 3. Journalizing business transactions in special journals.

Specific objective: At the end of this task, you will be able to journalize business
transactions in special journals according to the required procedures. To complete this
task, you need 9 hours.

To begin, find a quiet place to do your assignments, take your notebook, and a pen or a
pencil to write important points. Please read once again the specific objective of this task.

Assignment. Read the booklet that accompanied this guide.

Test
Attempt the exercises on booklet

Task 4: Posting journal entries from combination journal and special journals to
the general ledger and subsidiary ledgers.

Specific objective: At the end of this task, you will be able to post journal enters from
combination journal and special journals to the accounts in the general ledger and
subsidiary ledgers according to the required steps. To complete this task, you need 24
hours.

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To begin, find a quiet place to do your assignments, take your notebook and a pen or a
pencil to write important points. Before proceeding, read the specific objective of this
task once again.

Assignment
With the specific objective in mind, read your textbook on pages 190 – 216. Specifically,
you are required to know with regard to the following:
- Difference between general ledger and subsidiary ledger.
- Difference between accounts payable and accounts receivable
- Meaning of controlling accounts
- Accounts receivable ledger and accounts payable ledger.
- Posting from combination journal to accounts in the ledger
- Proving the accuracy of posting

Note that recording transaction in special journal and posting to ledgers are presented on
a separate booklet attached to your textbook and this study guide. This section dealt only
with combination journal. Immediately after you completed posting from combination
journal go to the booklet pages ______ to read how to record transactions in special
journals and positing them to accounts in the ledger.

Test 1
After reading the mentioned portions, attempt the following questions on a separate
paper.
1. Check your progress exercise 1 on page 192
2. Check your progress exercise 2 on page 197
3. Check your progress exercise 4 on page 215

To evaluate your performance, compare your answer with answers to Check Your
Progress Exercise on page 216.

Test 2
Attempt model examination questions indicated on pages 217 – 220 on a separate sheet
of paper.

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 DUTY 5
SUMMARIZING AND COMPLETING THE ACCOUNTING CYCLE FOR
MERCHANDISING BUSINESS

General objective: At the end of this duty, you will be able to summarize and complete
the accounting cycle for a merchandising business according to the prescribed steps. To
complete this duty, you need 39 hours.

Task 1. Preparing the eight-column worksheet

Specific objective: At the end of this task, you will be able to prepare an eight-column
worksheet according to the desired formats. To complete, this task, you need 9 hours. To
begin find a quiet place to do your assignments, take your notebook, and a pen or a pencil
to write important points. You are advised to read the specific objective of task 1 once
again.

Assignment.
With the specific objective in mind, read your textbook pages 221-239. Specifically, you
are required to know concerning the following points:
- Need for adjusting some general ledger accounts
- Adjustments
- Types of worksheets (six-column, eight-column, ten-column, and twelve-
column).
- Steps in the preparation of the eight-column worksheet.
You are advised to read pages 221-239 once again so that you can understand more
about the issues.

Test 1
If you are sure that you understood the above points, attempt the following questions:
1. Check your progress exercise 1 on page 223
2. Check your progress exercise 2 on page 226
3. Check your progress exercise 3 on page 229
4. Check your progress exercise 4 on page 237

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In order to evaluate your performance, compare your answers with Answers to Check
Your Progress Questions on page 240 and page 241.
If you are satisfied with your performance on test 1. attempt test 2 on a separate paper.

Test 2
Attempt model examination questions part I, part II, and part III on pages 242 – 244.

Test 3
Attempt the following questions on a separate paper
1. Define the following terms:
a. Adjustments
b. Inventory
c. Cost of merchandise sold
d. Prepaid expenses
2. Compare and contrast the six-column and eight-column worksheets.
3. Identify the two financial statements that are affected by merchandise inventory
adjustments.
4. Identify the two accounts that are used to adjust ending merchandise inventory.
5. Identify the two accounts that are used to adjust supplies.
6. Identify the two accounts that are used to adjust prepared insurance.

N.B. For better understanding, you can refer other reference books indicated on pages
244 and 245.

Task 2. Preparing financial statements

Specific objective: At the end of this task, you will be able to prepare financial statements
for a merchandising business from an eight-column worksheet according to prescribed
steps and formats. To complete this task, you need 12 hours.

To begin, find a quiet place to do your assignments, take your notebook, and a pen or
pencil to write important points. Please read once again the specific objective of task 2.

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Assignment
With the specific objective in mind, read your textbook pages 246 – 259. Specifically you
are required to know with regard to the following points:
- Types of financial statements for a merchandising business (page 247)
- Steps in preparing income statement (page 249)
- Forms of balance sheet (page 256)
- Steps in preparing balance sheet (page 257)
- Steps in preparing capital statement (pages 253 – 254)
- Supporting schedules for financial statements (page 258).
You are advised to read the above points once again. If you are confident enough, go
to the following tests.

Test 1
Attempt the following questions on a separate paper
1. Check your progress exercise 1 on page 252
2. Check your progress exercise 2 on page 254

Evaluate your performance by comparing your answer with Answer to Check Your
Progress on page 262

Test 2
Try illustrative problem on page 259 on a separate paper to evaluate your performance,
compare your answer with the solution to illustrative problem on pages 260-261

Test 3
Now in order to consolidate your knowledge about financial statements, attempt on a
separate paper model examination questions on pages 263 – 265.

Task 3. Journalizing and posting adjusting entries

Specific objective: At the end of this duty, you will be able to account for adjusting
entries according to the desired steps. To complete this task, you need 9 hours.

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To begin, find a quiet place to do you assignments, take your notebook, and a pen or a
pencil to write important points. Please read once again the specific objective of this task
before proceeding.

Assignment
With the specific objective of task 3 in mind, read your textbook pages 267 – 275.
Specifically, you are required to read with regard to the following points:
- Adjusting entry for beginning merchandise inventory (page 268)
- Adjusting entry for ending merchandise inventory (page 270)
- Adjusting entry for prepaid insurance (page 273)
- Adjusting entry for supplies (page 272)

After reading about the above points, think for a moment to check whether you
understood them. If you have a doubt, read them again. If you are confident enough,
attempt the following tests.

Test 1
Attempt the following questions on a separate paper.
1. Check your progress exercise 1 on page 272
2. Check your progress exercise 2 on page 275

To evaluate your performance, compare your answer to answer to your progress

questions on pages 292.

Test 2
Attempt model examination questions part II (No. 1 & 4) on pages 293 - 294

Task 4. Journalizing and posting closing entries

Specific objective: At the end of this duty, you will be able to journalize and post closing
entries as per the required steps. To complete this task, you need 9 hours. To begin, find a
quiet place to do your assignments, take your notebook, and a pen or pencil to write
important points. Before proceeding, read the specific objective once again.

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Assignment
With the specific objective in mind, read your textbook on pages 276-290. Specifically,
your are required to read with regard to the following points:
- Definition of closing entries (page 276)
- Closing entry for revenue account (page (pages 277-278)
- Closing entry for cost and expense accounts (pages 278-279)
- Closing entry for income summary (page 280)
- Closing entry for drawing account (pages 281-283)
- Completed general ledger (page 284)
- Post-closing trial balance (pages 284 – 285).
You are advised to read the above points once again before proceeding.

Test 1
After reading the above points for the second time, attempt Check Your Progress
Exercise 3 on page 284 on a separate sheet. To evaluate your performance, compare you
answer with the Answer to Check Your Progress Exercise on page 292

Test 2
Attempt model examination questions (part I, II, and part III) on pages 293 – 297.

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