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SPEC 2
Fundamentals of Accountancy,
Business and Management 2
Learning Module 1
Contact information
Email: aurelio768@gmail.com
Mobile number: 09387770402
Facebook profile: Aurelio Castrence Lopez Jr.
Learning Module
Fundamentals of Accountancy, Business and
Management 2
Module no.: 1 of 2
FL Design: CorreL (Correspondence Learning)
Course Code & Title: SPEC 2 – Fundamentals of Accountancy, Business and Management 2
Course Description: This is the continuation of the first Fundamentals of Accountancy, Business and
Management 1. It provides the continuation of the accounting cycle from the preparation of adjusting entries,
preparation of financial statements, and up to preparation of closing and reversing entries. It also deals with
transactions, financial statements and problems related to the operations of a merchandising type of business.
Furthermore, it includes an introduction to the financial statements of a manufacturing concern.
This is Module 1 of 2 of the course SPEC 2 – Fundamentals of Accountancy, Business and Management 2. This
learner module is developed for the flexible learning program of Aklan Catholic College and programmed to run for at
least a week. This module tackles the first three outcomes of the course:
1. Solved problems of a merchandising business.
This module is primarily used at home and it takes advantage of task-based approach to learning and self-paced
learning. Success of learning would essentially depend on the collaboration between you and your instructor and
your commitment to self-directed learning.
It contains the (a) essential concept notes, (b) instructions to further readings and media, (c) quizzes, (d)
activities, (e) peer work, (f) reflection pages, (f) written test, and (g) task.
How to use this Module
Below is a learning program or sample learning cycle prepared by the module developer to help you navigate
your way through the module works. You are highly encouraged to follow the program to increase the success rate in
using the module.
It is very important that every time you begin work on your module that you begin with a prayer for guidance,
openness, clarity of mind, and wisdom. At the end of each module work, say a prayer of gratitude, guidance, and
passion to put into good use what you have learned. See the prayer page for the prayers we say before and after
each learning session.
As this module comes with reading materials and a dual flash drive containing learning media, you should study
thoroughly all the required readings and other media cited in the concept notes. All readings and media written in
bold in the concept notes can be found in the dual flash drive. If you have any issues in accessing the content of the
dual flash drive, please contact your instructor right away.
You are also encouraged to study supplementary materials provided in the dual flash drive. It is wise that the you
review first the outline of the module and the guide questions in each lesson to get an overview of the module. This
will help you create a focus to facilitate answering the quizzes and written test and performing the activities and the
task in each lesson.
It is recommended that you complete two lessons a day so that you can have ample time to prepare for the
written test and for the task performance.
To keep you on tract of your learning task, you can create a plan or program of your home-based learning.
Creating a routine or learning task will help you create a focus that is essential for your success in this learning
modality.
The table below is a sample of a personal learning plan. You are encouraged to use the same template or
create one that work better for you. It is also important to coordinate this schedule with your instructor and your
assigned peer.
Module 1 – Week 1
Day 1 Day 2 Day 3 Day 4
Course Mon Tue Wed Thu Fri
SPEC 2 • Opening prayer • Opening prayer
• Study all • Study all
8:00 am – 12:00 materials materials
noon • Answer quizzes • Answer quizzes
• Perform • Perform
activities activities
• Work with peer • Work with peer
• Write reflection • Write reflection
• Closing prayer • Closing prayer
Other Subjects • Opening prayer • Opening prayer
• Study all • Study all
materials materials
8:00-12:00 • Answer quizzes • Answer quizzes
• Perform • Perform
activities activities
• Work with peer • Work with peer
• Write reflection • Write reflection
• Closing prayer • Closing prayer
For activities that require writing, write legibly. For Learning Activity Sheets 1 and 3, you should necessarily need
to use an extra clean sheet of paper for your answers. For Learning Activity Sheets 2, you may write the letter of your
answer on the space before the item number. Extra sheets of paper should be inserted between the pages where the
activity can be found. Don’t forget to label these extra sheets with your name and the title of the activity.
Make sure to take all learning activity sheets with care and diligence. Some activities may be performed
individually while some activities may require collaboration with your peer.
For collaborative activities, called Peer work in this module, your instructor will provide the name and mobile
number of the students with whom you will collaborate. The Peer work is one of the most essential feature of this
module and will mean a lot for learning to succeed as we recognized that you can learn better if you share insights
and perspectives with another. The peer work may be done through phone calls or text messaging. If better channels
are accessible at the time of the activity such as chat or forum, make use of better channel. If connecting with your
designated peer through the most basic means is impossible, try your best to solicit ideas from members of your
household on the questions, statements, or instructions contained in the peer work.
Once you have completed this module, place this module and all required outputs for the week in the learning
packet to prepare them for collection. Make sure to recheck your submissions especially soft copies that you have
stored in the dual flash drive. If you are having any trouble in storing the files into your dual flash drive, please contact
your instructor right away.
Course Requirements
Other requirements
None
Table of Contents
Lesson 1
Analyzing the Accounting Process
I. Intended Learning Outcomes
At the end of this lesson, the learner will have
1. Reviewed the steps of the accounting process.
2. Solved problems reviewing the steps in the accounting process.
The account titles used by a merchandising business does not totally differ from that of a service type of
business. Typical account titles used for merchandising, in addition to that which were discussed for a
service type business, are as follows:
Income
a. Sales – revenues earned as a result of sale of merchandise.
b. Sales Returns – a contra account against sales, used when a customer returns goods previously
sold to the customer.
c. Sales Discounts – a contra account against sales, used when a customer pays within the discount
period, wherein this account reduces the amount to be paid by such customer.
Expenses
a. Cost of Sales – the cost incurred to purchase or to produce the products sold to customers during
the period; also called cost of goods sold.
b. Purchases – the cost of the goods acquired for resale from a supplier.
c. Purchase Returns – a contra account against purchases, used when the entity returns goods
previously purchased from a supplier.
d. Purchase Discounts – a contra account against purchases, used when the entity pays within the
discount period, wherein this account reduces the amount to be paid by the entity.
e. Transportation In/Freight In – the cost of transporting/delivering purchased goods from a supplier
to the entity.
f. Transportation Out/Freight Out – the cost of transporting/delivering sold goods from the entity to
the customer.
Asset
a. Merchandise Inventory – these are assets which are held for sale in the ordinary course of the
business. The account pertains to the cost of goods previously acquired/purchased but not yet sold
and still in the possession of the entity.
Net Sales* xx
Cost of Sales** (xx)
Gross Profit xx
Operating Expenses*** (xx)
Operating Profit xx
Finance Costs (Interest Expense) (xx)
Net Income xx
Terms of Transactions
Merchandise may be purchased and sold either on cash or credit. Goods sold/acquired on credit have
certain credit terms which determines when the transaction should be paid. A credit term would normally
look like this:
“2/10, net/30”
The first part “2/10” determines the discount period (10 days) and the discount rate (2%). It means if we
or the customer pays within 10 days, a 2% discount shall be deducted from the amount to be paid. 2/10
simply means 2% within 10 days.
The second part “net/30” is the credit period. It determines the number of days allowed for payment. It
means that if you fail to pay within the 10 days discount period, you will not avail the discount, and you
need to pay the whole amount 30 days from the transaction date.
Let’s say for example, the entity acquired goods from a supplier on March 1, 2021 with credit terms of
2/10, n/30. If the entity pays within 10 days, on or before March 11, the amount will be deducted with a
2% discount. If the entity pays beyond March 11, the entity pays the gross amount, and the entity is
given up to March 31 (March 1 plus 30 days) to pay for the amount.
The discount found on credit terms is called “cash discounts” or prompt payment discount, which are
recorded as sales discount on the part of the seller and purchase discount on the part of the buyer.
Trade Discounts
Trade discounts are deductions from the list price or catalog price in arriving at the invoice price. Trade
discounts are not recorded on the books, rather the invoice price are directly recorded as
sales/purchases.
Freight Terms
Terms normally related to freight includes FOB shipping point, FOB destination, freight collect and freight
prepaid. FOB is short for freight on board.
Under FOB destination, ownership of goods purchased is transferred only upon receipt of the goods by
the buyer at the point of destination. Under FOB destination, the goods in transit are still the property
of the seller.
If the term is FOB shipping point, ownership in transferred upon shipment of the goods and therefore,
the goods in transit are the property of the buyer.
These terms, FOB destination and FOB shipping point, determines who is legally obliged to pay for
the freight and therefore determines who actually records freight in or freight out.
Freight collect – this means that the freight charge on the goods shipped is not yet paid. The common
carrier shall collect the same from the buyer. Thus, under this, the freight charge is actually paid by the
seller.
Freight prepaid – this means that the freight charge on the goods shipped is already paid by the seller.
These terms determine the party who actually pay the freight charges, but not the party who is legally
responsible to pay the freight charge.
Inventory Systems
Merchandise inventory is the key factor in determining cost of sales. Because merchandise inventory
represents goods available for sale, there must be a method of determining both the quantity and the
cost of these goods.
For a more detailed discussion, look into Chapter 8_Basic Accounting: Merchandising Operations in
the ebooks folder of your flash drive.
Reference:
1. Ballada, Win, Ballada, Susan, Basic Accounting (2015 Edition), Domdane Publishers & Made Easy
Books
Required:
1. Compute for the following:
a. Net Sales d. Cost of Goods Sold
b. Net Cost of Purchases e. Gross Profit
c. Goods Available for Sale f. Net Profit
On June 1, 2021, Marites De Chavez Forest Products sold merchandise with a P120,000 list price:
Marquez Trading entered into the following transactions for the month of August:
a. On August 1, purchased merchandise with a list price of P120,000. The seller gave a trade discount
of 10% and terms of 2/10, net 30, FOB shipping point. Marquez paid on Aug. 1 the freight for the
said merchandise amounting to 5,000. The account was paid on Aug. 10.
b. On August 2, P245,000 merchandise was purchased with the terms of 2/15, net 60, FOB
destination. The seller paid on Aug. 3 the freight for the said purchase amounting to P10,500. The
account was paid on Aug. 20.
c. On August 5, purchased merchandise with a list price of P100,000. The terms are 15% trade
discount, 3/10, net 20, FOB shipping point. The seller paid on Aug. 5 the freight for the said
merchandise amounting to P4,750. The payable was paid on Aug 15.
d. On August 9, purchased merchandise with a list price of P150,000. The terms provided for a 5%
and 10% deduction in the list price and 2/10, net 30, FOB destination. Marquez paid on Aug. 9 the
freight for the said purchases, P7,600. The payable was paid on August 29.
Required: Prepare the journal entries in relation to the purchase, freight and payment.
Duterte Merchandising entered into the following transactions in the month of September 2018:
a. On September 2, sold merchandise on account amounting to P35,000. Terms are 2/10, net 30, FOB
shipping point. The buyer paid for the transportation of the said sale amounting to P1,150. The
account was collected September 12.
b. On September 8, merchandise was sold amounting to P50,000. Terms are 2/15, net 45, FOB
shipping point. Duterte paid P3,000 to the freight company. The sale was collected on September
23.
c. On September 10, merchandise was sold with a list price of P40,000. Duterte gave the buyer a
trade discount of 10% and the terms are 2/10, net 30, FOB destination. The buyer paid the
forwarders for the shipment amounting to P2,250. The said account was collected on September 25.
d. On September 14, sold merchandise amounting to P75,000. Terms are 3/15, net 45 FOB
destination. Duterte paid for the shipment of the said sale amounting to P5,700. The buyer paid the
account on September 30.
Required: Prepare the journal entries in relation to the sale, freight and collection.
Write legibly your reflections in the space provided. You can use extra sheet if you wish to write more.
Label the extra sheet Reflection LA1-M1 and insert between these pages. You can use Microsoft
word if available. Title the file Reflection LA1-M1 and store in the storage device that comes in the
learning journal.
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Score: ______
Instruction: Read each question carefully. Write the letter of your answer on the space provided before
the item number.
MERHANDISE ACCOUNTING BASICS
2. The account that appears in the chart of accounts for a merchandising entity but not for a service
entity is
a. Accounts receivable c. Advertising expense
b. Accumulated depreciation d. Sales returns and allowances
b. Accounts payable xx
Inventory xx
c. Inventory xx
Accounts receivable xx
d. Inventory xx
Cash xx
6. An amount deducted from the catalog price for an item of merchandise is called a
a. Customer discount c. Sales discount
b. Purchase Discount d. Trade discount
8. The amount of cost of goods sold available for sale during the year depends on the amounts of
a. Beginning merchandise inventory and cost of goods sold.
b. Beginning merchandise inventory and net purchases.
c. Beginning merchandise inventory, cost of goods sold and ending merchandise inventory.
d. Beginning merchandise inventory, net purchases and ending merchandise inventory.
9. The excess of net sales over the cost of goods sold is called
a. Gross profit c. Operating profit
b. Merchandising income d. Profit
11. A supplier offers the following discounts: Trade discounts of 10% at list price and another cash
discount of 5% if paid in full before the due date. How much is to be paid if a customer pays before
due date at a list price of P16,000?
a. P13,680 c. P14,000
b. P15,520 d. P16,000
12. Assuming that net purchases was P900,000 during the year and that ending merchandise inventory
was P20,000 less than the beginning merchandise inventory of P250,000, how much was cost of
goods sold?
a. P1,130,000 c. P 920,000
b. P 670,000 d. P1,170,000
13. Goods totaling P50,000 were purchased February 2 with terms 2/10, n/30. Returns of P10,000 were
made on February 10. What discounts, if any, can be availed of if the invoice was paid on February
12?
a. None c. P800
b. P1,000 d. P200
14. Grace Ancheta Company which uses the gross price method of recording purchases, and the
periodic inventory system, bought merchandise for P8,000, terms 2/10, n/30. If Ancheta returns
P2,000 of the goods to the vendor, the entry to record the return should include a
a. Credit to purchases returns and allowances of P1,960.
b. Debit to accounts payable to P2,000.
c. Debit to discounts lost of P40.
d. Debit to purchase returns and allowances of P1,960.
15. Olive Valenzuela Traders purchased merchandise from San Jose Suppliers for P3,600 list price,
subject to a trade discount of 25%. The goods were purchased on terms of 2/10, n/30 F.O.B.
destination. Valenzuela paid P100 transportation costs. Valenzuela returned P400 (list price) of the
merchandise to San Jose and later paid the amount due within the discount period. The amount
paid is
a. P2,254 c. P2,246
b. P2,252 d. P2,352
16. The December 31, 2020 trial balance for Aileen Maglana Company included the following
purchases, P40,000; purchases returns and allowances, P2,000; transportation in, P3,000; ending
inventory was P8,000. What was the cost of goods sold for 2020?
a. P39,000 c. P38,000
b. P33,000 d. None of the above
Debit Credit
Sales 750,000
Sales returns and allowances 15,000
Sales discount 10,000
Purchases 170,000
Purchases returns and allowances 20,000
Transportation in 30,000
Selling expenses 75,000
General and administrative expenses 275,000
In addition, beginning merchandise inventory was P55,000 and ending merchandise inventory was
P35,000.
Write legibly your reflections in the space provided. You can use extra sheet if you wish to write more.
Label the extra sheet Reflection LA2-M1 and insert between these pages. You can use Microsoft
word if available. Title the file Reflection LA2-M1 and store in the storage device that comes in the
learning journal.
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Transactions for the Mariano Lerin Bookstore for March 2020 follows:
Mar 2 Purchased merchandise on credit from Digao Publishers, terms 2/10, n/30, FOB
destination, P74,000.
3 Sold merchandise on credit to Detoya Books Shop, terms 1/10. n/30, FOB
shipping point, P10,000.
5 Sold merchandising for cash, P7,000.
6 Purchased and received merchandise on credit from Made Easy Bookstore, terms
2/10, n/30, FOB shipping point, P42,000.
7 Received freight bill from Super Express from shipment received on March 6,
P570.
9 Sold merchandise on credit to Recoletos Books, terms 1/10, n/30, FOB shipping
point, P38,000.
10 Purchased merchandise from Digao Publishers, terms 2/10, n/30, FOB shipping
point, P26,500, including freight cost of P500.
11 Received freight bill from Super Express for sale on March 3.
12 Paid Digao Publishers for purchase of March 2.
13 Received payment in full for Detoya Books Shop’s purchase of March 3.
14 Paid Made Easy Bookstore half the amount owed on the March 6 purchase. A
discount is allowed on partial payment.
15 Returned faulty merchandise worth P3,000 to Digao Publishers for credit against
purchase of March 10.
16 Purchased office supplies from Olamit Supplies for P4,780, terms n/10.
17 Received payment from Recoletos Books for half of the purchase of March 9. A
discount is allowed on partial payment.
18 Paid Digao Publishers in full amount owed on purchase of March 10, less return
on March 15.
19 Sold merchandise to Sir Ed Trading on credit, terms 2/10, n/30, FOB shipping
point, P7,800.
20 Returned for credit several items of office supplies purchased on March 16,
P1,280.
22 Issued a credit memo to Sir Ed Trading for returned merchandise, P1,800.
25 Paid for purchase of March 16, less returns on March 20.
26 Paid freight entity for freight charges for March 7 and 11.
27 Received payment of amount owed by Sir Ed Trading for purchase of March 19
less credits of March 22.
28 Paid Made Easy Bookstore for the balance on the March 6 purchase.
31 Sold merchandise for cash, P9,730.
Listed below are the December 1, 2020 account balances of the Teresita Buenaflor Shoes:
Required:
1. Post the beginning balances on the General Ledger.
2. Prepare the journal entries and post the entries for the month of December.
3. Prepare the worksheet using the following information:
a. Salaries in the amount of P51,000 have accrued on December 31.
b. Insurance coverage with premiums of P2,000 has expired at month-end.
c. Depreciation on the building and on the equipment for the month amounted to P9,000 and
P12,000, respectively.
d. Supplies on hand at month-end amounted to P14,000.
e. A count of the merchandise inventory on December 31, 2020 amounted to P397,000.
Write legibly your reflections in the space provided. You can use extra sheet if you wish to write more.
Label the extra sheet Reflection LA3-M1 and insert between these pages. You can use Microsoft
word if available. Title the file Reflection LA3-M1 and store in the storage device that comes in the
learning journal.
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WRITTEN TEST
This written test covers the underpinning knowledge, concepts and principles learned from Lesson 1 to
Lesson 3 of this module.
Problem 1
Armando Ordinanza Company entered into the following transactions during the month of June 2018:
June 2 Purchased 1,000 tires at a cost of P600 per tire. Terms of payment: 1/10, net 45.
4 Paid trucking firm P8,000 to ship the tires purchased on June 2.
5 Purchased 600 tires at a cost of P600 per tire. Terms of payment: 2/10, net 30.
6 Paid trucking firm P5,000 to ship the tires purchased on June 5.
7 Returned 150 of the tires purchased on June 2 because they were defective.
received a credit on open account from the seller.
11 Paid for tires purchased on June 2.
13 Sold 700 tires from those purchased on June 2. The selling price was P900 per
tire. Terms 1/10, net 30.
22 Received cash from sale of tires on June 13.
30 Paid for tires purchased on June 5.
Problem 2
Transportation in P 172,000
Operating Expenses 1,105,000
Merchandise inventory, 1/1/2021 1,200,000
Sales (Gross) 6,250,000
Merchandise inventory, 12/31/2021 1,900,000
Purchases 4,300,000
Purchases Returns and Allowance 129,000
Sales Returns and Allowance 625,000
Purchase Discounts 215,000
Sales Discounts 125,000
1. The entry to record the return of goods from a customer would include a
a. Credit to Sales
b. Credit to Sales Returns and Allowances
c. Debit to Sales
d. Debit to Sales Returns and Allowances
4. The collection of P4,000 account within the 2% discount period would result in a
a. Credit to accounts receivable for P3,920.
b. Credit to cash for P3,920.
c. Debit to accounts receivable for P3,920.
d. Debit to sales discounts for P80.
5. The entry to record payment on a P15,000 account within the 2% discount period would include a
a. Credit to accounts payable for P15,000
b. Credit to purchase discounts for P300.
c. Debit to accounts payable for P14,700.
d. Debit to cash for P15,000.
6. A buyer received an invoice for P6,000 dated June 10. If the terms are 2/10, n/30, and the buyer
paid the invoice within the discount period, what amount will the seller receive?
a. P6,000 c. P4,800
b. P5,880 d. P 120
8. When the seller advances the transportation costs and the term of sale are FOB shipping point, the
seller records the payment of the transportation costs by debiting
a. Accounts payable c. Sales
b. Accounts receivable d. Transportation in
9. The excess of net sales over the cost of goods sold is called
a. Gross profit c. Operating profit
b. Merchandising income d. Profit
10. The basic difference between the financial statements of a merchandising entity and a service entity
include the cost of goods sold section of the income statement and the
a. Equity section of the balance sheet.
b. Inclusion of merchandise inventory on the balance sheet as a current asset.
c. Other income section of the income statement.
d. Profit figure.