COMPARISON OF PRO-FORMA JOURNAL ENTRY

COMPARISON OF PRO-FORMA JOURNAL ENTRY

UNDER PERPETUAL INVENTORY SYSTEM
UNDER PERIODIC INVENTORY SYSTEM
1. Sales of merchandise on cash basis (at selling
1. Sales of merchandise on cash basis (at selling price)
price) First Entry Dr. Cash Pxx
Dr. Cash Pxx Cr. Sales Pxx
Cr. Sales Pxx Second Entry Dr. Cost of Goods Sold Pxx
Cr. Sales Pxx
2. Sales of merchandise on account (selling price w/
2. Sales of merchandise on account (selling price) cost)
Dr. Accounts Receivable Pxx First Entry Dr. Accounts Receivable Pxx
Cr. Sales Pxx Cr. Sales Pxx
Second Entry Dr. Cost of Goods Sold Pxx
Cr. Merchandise Inventory Pxx
3. Sales return or merchandise return from customer
3. Sales return or merchandise return from customer (selling price)
(selling price) First Entry Dr. Sales Returns & Allowances Pxx
Dr. Sales Returns and Allowances Pxx Cr. Accounts Receivable Pxx
Cr. Accounts Receivable Pxx (on account)
Dr. Sales Returns & Allowances Pxx
Cr. Cash Pxx
(on cash basis)
Second Entry Dr. Merchandise Inventory Pxx
Cr. Cost of Goods Sold Pxx
4. Sale of merchandise w/ discount
4. Sale of merchandise w/ discount Dr. Cash Pxx
Dr. Cash Pxx Sales Discount xx
Sales Discount xx Cr. Accounts Receivable Pxx
Cr. Accounts Receivable Pxx 5. Purchase of merchandise on cash basis
5. Purchase of merchandise on cash basis Dr. Merchandise Inventory Pxx
Dr. Purchases Pxx Cr. Cash Pxx
Cr. Cash Pxx 6. Purchase of merchandise on account
6. Purchase of merchandise on account Dr. Merchandise Inventory Pxx
Dr. Purchases Pxx Cr. Accounts Payable Pxx
Cr. Accounts Payable Pxx 7. Purchase return or merchandise return to supplier
7. Purchase return or merchandise return to supplier Dr. Accounts Payable Pxx
Dr. Accounts Payable Pxx Cr. Merchandise Inventory Pxx
Cr. Purchase Returns & Allowances Pxx 8. Purchase of merchandise(payment made w/
8. Purchase of merchandise(payment made w/ discount)
discount) Dr. Accounts Payable Pxx
Dr. Accounts Payable Pxx Cr. Cash Pxx
Cr. Cash Pxx Cr. Merchandise Inventory Pxx
Cr. Purchase Discount xx 9. Freight costs incurred by the buyer (FOB Shipping
9. Freight costs incurred by the buyer (FOB Shipping Point)
Point) Dr. Merchandise Inventory Pxx
Dr. Freight In Pxx Cr. Cash Pxx
Cr. Cash Pxx 10. Freight Cost incurred by the seller (FOB
10. Freight Cost incurred by the seller (FOB Destination)
Destination) Dr. Freight Out Pxx
Dr. Freight Out Pxx Cr. Cash Pxx
Cr. Cash Pxx 11. Payment of various Expenses
11. Payment of various Expenses Dr. Various Expenses Pxx
Dr. Various Expenses Pxx Cr. Cash Pxx
Cr. Cash Pxx 12. Cash used by the owner for personal used
12. Cash used by the owner for personal used Dr. Owner’s Drawing Pxx
Dr. Owner’s Drawing Pxx Cr. Cash Pxx
Cr. Cash Pxx
 CLOSING ENTRIES – close all nominal accounts CLOSING ENTRIES – close all nominal accounts

UNDER PERDIODIC INVENTORY SYSTEM UNDER PERPETUAL INVENTORY SYSTEM

Step 1 – Close Sales, Sales Returns and Allowances and

Step 1 – Close Sales, Sales Returns and Allowances and
Sales Discount to Income Summary account.
Sales Discount to Income Summary account.
Closing Entry:
Closing Entry:
Dr. Sales Pxx
Dr. Sales Pxx
Cr. Sales Returns&Allowances Pxx
Cr. Sales Returns&Allowances Pxx
Cr. Sales Discounts xx
Cr. Sales Discounts xx
Cr. Income Summary xx
Cr. Income Summary xx
To close sales and sales related
To close sales and sales related
accounts to income summary account.
accounts to income summary account.

Step 2 – Close Cost of Goods Sold account to Income

Step 2 – Close Purchases, Purchase Returns & Allowances,
Summary Account.
Freight In and Purchase Discounts.
- Set up Inventory End as Inventory Beginning
Closing Entry:
Dr. Income Summary Pxx
Closing Entry:
Cr. Cost of Goods Sold Pxx
Dr. Merchandise Inventory Pxx
To close cost of goods sold
Dr. Purchase Returns&Allowances xx
account to income summary account.
Dr. Purchase Discounts xx
Dr. Income Summary xx
Cr. Purchases Pxx
Cr. Freight In xx
To close purchases and
purchases related accounts to income
summary and to set inventory end as
inventory beginning.

Step 3 – Close all Expenses accounts to Income Summary. Step 3 – Close all Expenses accounts to Income Summary.

Closing Entry: Closing Entry:

Dr. Income Summary Pxx Dr. Income Summary Pxx
Cr. Salaries Pxx Cr. Salaries Pxx
Cr. Freight Out xx Cr. Freight Out xx
Cr. Rent xx Cr. Rent xx
Cr. Advertising xx Cr. Advertising xx
To close expenses account to To close expenses account to
income summary account. income summary account.

Step 4 – Close Income Summary account to Capital. Step 4 – Close Income Summary account to Capital.

Closing Entry: Closing Entry:

Dr. Income Summary Pxx Dr. Income Summary Pxx
Cr. Owner’s Capital Pxx Cr. Owner’s Capital Pxx
To close income summary to To close income summary to
capital. capital.

Step 5 – Close Drawing account to Capital account. Step 5 – Close Drawing account to Capital account.

Closing Entry: Closing Entry:

Dr. Owner’s Capital Pxx Dr. Owner’s Capital Pxx
Cr. Owner’s Drawing Pxx Cr. Owner’s Drawing Pxx
To close drawing to To close drawing to
capital. capital.