Transportation Costs

Who shoulders the Who pays the

Freight Terms transportation costs? shipper?

FOB Destination, Freight Prepaid Seller Seller

FOB Shipping Point, Freight Collect Buyer Buyer
FOB Destination, Freight Collect Seller Buyer
FOB Shipping Point, Freight Prepaid Buyer Seller

Comparison of Income Statement

Service

Revenue XX
Less:Expenses (XX)
Profit/(Loss) XX/(XX)

Computation of Net Sales

Gross Sales XX
Less: Sales Discounts (XX)
Sales Returns and Allowances (XX)
Net Sales XX

Computation of Net Purchases

Gross Purchases XX
Less: Purchases Discounts (XX)
Purchases Returns and Allowan (XX)
Net Purchases XX

Computation of Net Cost of Purchases

Gross Purchases XX
Less: Purchases Discounts (XX)
Purchases Returns and Allowan (XX)
Net Purchases XX
Add: Transportation In XX
Net Cost of purchases XX
me Statement

Merchandising

Net Sales XX
Less: Cost of Sales (XX)
Gross Profit XX
Less: Operating Expenses (XX)
Profit/(Loss) XX

Computation of Cost of Sales

Inventory, beginning XX
Net purchases/net cost of purchases XX
Goods available for sales XX
Less: inventory, ending XX
Cost of Sales XX
Sale of merchandise for cash, 2,500.
Cash 2,500
Sales 2,500
To record cash sales

Sale of merchandise on account, 2,500.

A/R 2,500
Sales 2,500
To record credit sales

Sold merchandise on Sept 20, 3,000, terms, 2/10, n/60.

A/R 3,000
Sales 3,000
To record credit sales, terms, 2/10, n60.

Client paid on Sept 30.

Cash 3,000
Sales Discount 60
A/R 2,940
To record collection within the discount period

Customer returned merchandise amounting to 1,000.

Sales Returns and Allowances 1,000

Cash / A/R 1,000
To record customer returns

Transporation Out (Seller)

Case 1: Assume that the entity sold merchandise on Nov 30, totalling P17,000, FOB destination, freight prepaid; 2/10, n30,

A/R 17,000
Transportation Out 1,900
Sales 17,000
Cash 1,900
To record credit sales, terms, 2/10, n30, FOB destination, freight prepaid

The collection mas made on Dec 5

Cash 16,660
Sales Discount 340
A/R 17,000
To record collection within the discount period
If beyond discount period

Cash 17,000
A/R 17,000

Case 2: Assume that the entity sold merchandise on Nov 30, totalling P17,000, FOB shipping point, freight collect; 2/10, n30

A/R 17,000
Sales 17,000

The collection mas made on Dec 5.

Cash 16,660
Sales Discount 340
A/R 17,000
To record collection within the discount period

If beyond discount period

Cash 17,000
A/R 17,000

Case 3: Assume that the entity sold merchandise on Nov 30, totalling P17,000, FOB destination, freight collect; 2/10, n30, 1

A/R 15,100
Transportation 1,900
Sales 17,000

The collection mas made on Dec 5.

Cash 14,760
Sales Discount 340
A/R 15,100

If beyond discount period

Cash 15,100
A/R 15,100

Case 4: Assume that the entity sold merchandise on Nov 30, totalling P17,000, FOB shipping point, freight prepaid; 2/10, n3

A/R 18,900
Sales 17,000
 Cash 1,900

The collection mas made on Dec 5.

Cash 18,560
Sales Discount 340
A/R 18,900

Cash 18,900
A/R 18,900
n, freight prepaid; 2/10, n30, 1,900.
oint, freight collect; 2/10, n30, 1,900.

n, freight collect; 2/10, n30, 1,900.

oint, freight prepaid; 2/10, n30, 1,900.

Purchase of merchandise for cash, 2,500.

Purchases 2,500
Cash 2,500
To record cash purchases

Purchase of merchandise on account, 2,500.

Purchases 2,500
A/P 2,500
To record credit purchases

Purchased merchandise on Sept 20, 3,000, terms, 2/10, n/60.

Purchases 3,000
A/P 3,000
To record credit purchases, terms, 2/10, n60.

Paid on Sept 30.

A/P 3,000
Purchase discount 60
Cash 2,940

Returned merchandise amounting to 1,000.

A/P 1,000
Purchases Returns andAllowance 1,000

Transporation In (Buyer)

Case 1: Assume that the entity purchased merchandise on Nov 30, totalling P17,000, FOB destination, freight prepaid; 2/10, n

Purchases 17,000
A/P 17,000
To record credit purchases, terms, 2/10, n30, FOB destination, freight prepaid

Payment mas made on Dec 5

A/P 17,000
Purchase Discount 340
Cash 16,660

If beyond discount period

A/P 17,000
Cash 17,000

Case 2: Assume that the entity purchased merchandise on Nov 30, totalling P17,000, FOB shipping point, freight collect; 2/10,

Purchases 17,000
Transportation In 1,900
A/P 17,000
Cash 1,900

Payment mas made on Dec 5

A/P 17,000
Purchase Discount 340
Cash 16,660

If beyond discount period

A/P 17,000
Cash 17,000

Case 3: Assume that the entity purchased merchandise on Nov 30, totalling P17,000, FOB destination, freight collect; 2/10, n3

Purchases 17,000
A/P 15,100
Cash 1,900

Payment mas made on Dec 5.

A/P 15,100
Purchase Discount 340
Cash 14,760

If beyond discount period

A/P 15,100
Cash 15,100

Case 4: Assume that the entity purchased merchandise on Nov 30, totalling P17,000, FOB shipping point, freight prepaid; 2/10

Purchases 17,000
Transportation In 1,900
A/P 18,900
Payment mas made on Dec 5.

A/P 18,900
Purchase Discount 340
Cash 18,560

If beyond discount period

A/P 18,900
Cash 18,900
tion, freight prepaid; 2/10, n30, 1,900.
g point, freight collect; 2/10, n30, 1,900.

tion, freight collect; 2/10, n30, 1,900.

g point, freight prepaid; 2/10, n30, 1,900.