ADVANCED ACCOUNTING

PRINCIPLES 2 (AP 127)

UNIT 1: ACCOUNTING FOR
MERCHANDISING CONCERN

Name of Student: ……………………………………………………………………………………….. Set: ………… Block & Schedule: ……………………

Address: …………………………………………………………………………… Course & Year: …………………………. Date Returned: ……………….

FB Account: ……………………………………… Email Address: …………………………………………………Contact #: …………………………………..

GADTC-INSTITUTE OF BUSINESS AND FINANCIAL SERVICES | MALORO, TANGUB CITY, MIS.OCC.

GOV. ALFONSO D.TAN COLLEGE
MALORO, TANGUB CITY

VISION
GADTC is integral to Tangub City’s becoming a center
for learning and eco-cultural tourism by producing God-
centered citizens committed to be light of the world.

MISSION
To provide opportunities for continuing education for
faculty and staff, providing upgraded facilities for quality
and research-based instruction to students towards
community engagement and linkages to industry.

CORE VALUES
*INTEGRITY *COMPASSION
*EXCELLENCE

INSTITUTIONAL LEARNING OUTCOMES

Alfonsos as Lux Mundi: Serving Humanity
with Empowered Mind, Passionate Heart and
Virtuous Soul.

1|Page
 ALFONSOS ATTRIBUTES

GLOBALLY COMPETETIVE GOOD SAMARITAN

PROFESSIONAL

GLOBAL CITIZEN GOD-CENTERED

CITIZEN

INSTITUTE OF
BUSINESS AND FINANACIAL
SERVICES
VISION
The Institute of Business and Financial Services is the
source of research-based knowledge and skills for
learning, leader in the preservation of the environment
and culture heritage and molder of the youth to become
God-centered citizens equipped with values on integrity,
compassion and excellence

2|Page
 MISSION

The Institute of Business and Financial Services, being

the learning arm of Gov. Alfonso D. Tan College,
commits by:
• Providing students and other stakeholders with the
research-based knowledge and skills for learning
and ideals for the preservations of environment
and culture heritage through community
engagement and linkages
• Developing within the students as indepth
strategies on eco-cultural insights and foresights.
• Transforming the student’s lives in line with
values on integrity, compassion and excellence.

GOALS AND OBJECTIVES

1. To engage in activities that can enhance student’s

awareness of the city’s environment and cultural
heritage and enhance their preservation, welfare
and development for the next generation to come
2. To ensure that the graduates of GADTC cannot be
caught off guard instead can go alongside with this
ever-changing business world.
3. To tie up linkages and collaboration with all
benefactors and stakeholders for the assurance of
the graduates’ employability everywhere in the
world as long as there are opportunities.

3|Page
 FOREWORD
The world is currently experiencing an economic
crisis due to COVID-19 pandemic. Universities, schools,
and other agencies must take its initiative in finding ways
to sustain its mainstream. Owing to this pandemic, the
education sector and other organizations are now willing
to adapt and adjust to the new normal, which is obviously,
using various technologies like Zoom, Google Classroom,
Facebook, Messenger, Canvas, etc. to connect to each
other and still able to carry out a personality.
“Online learning has been already being utilized
under progressive countries like China, South Korea, the
U.S, and India,” A.Hallberg, 2017. But for a third world
country like the Philippines, conducting an online class
would be a great hindrance to sustainable and continuous
education. In fact, the internet cost and access and
technical problems are considered barriers in online
learning.
According to C.A. Toquero, 2020,” there is also a
greater need for educational institutions to strengthen
the practices in the curriculum and make it more
responsive to the learning needs of the students even
beyond the conventional classrooms”.
However, there are still a lot of areas that do not
have internet connectivity, and still, a lot of Filipino
households’ do not have any smartphone. That is why
producing a module would help the students
tremendously to continue their education. This will be
effective and efficient tool as students need to do their
studies and activities at home. Also, learning on a

4|Page
physical book absorbs more information and is tailored
to fit with the asynchronous type of learning.
With, it is a condensed yet informative module as
it includes video transcription and further readings
provided for them to maximize their physical references
in their own homes as they embark on this new normal.

PREFACE
Maybe you are on the verge of having too many
choices and you need to make a specific decision for you
to move forward to the next phase of your desired career
path. Or maybe you are not sure of what you really need
and want as a young student considering that nowadays,
information technology, social media, and the like,
provide the opportunity for us to change our effectiveness
in decision-making.
Basic microeconomics will bring insight and
realization that what we are doing in our daily lives which
include decisions that we made is part of the economic
activities.
The most important part of this journey is that
you will be able to relate yourself to every lesson and
activity that you will be engaging in. Have your individual
take away until we reach our destination that will be
useful in your life-long learning.

5|Page
 INTRODUCTION
The previous course illustrated the accounting
cycle of entities that earned revenues by providing
services. A service business sells knowledge or expertise
while a merchandising business sells a particular or a
group of products. These products will be sold either
wholesale or retail in the same form that they were
bought.
In this course deals with the nature, scope and
limitation of the field of accounting affecting
merchandising operation organized as a sole
proprietorship. This is designed to meet the basic needs
of all business students, regardless of how accounting
records, techniques and methodologies are utilized to
present useful accounting information from mass of data.
Emphasis is placed on understanding the reasons
underlying basic accounting concepts and providing
students with adequate background in the recording,
classifying, summarizing, and interpreting functions to
enable them to appreciate the varied use of accounting
data.
This module composes the following parts, namely:
1. Take Part In (Engage)
Prior knowledge is activated and pre-assessed.
This is required but not graded.

2. Tour (Explore)
Investigate the phenomenon, prior knowledge is
challenged, ideas are created.

6|Page
 3. Spell Out (Explain)
Explain the phenomenon, new knowledge is
gained and applied.

4. Involve (Elaborate)
Application of knowledge towards new situations,
knowledge is deepened and extended.

5. Examine (Evaluate)
Reflection of knowledge and learning process,
assessment

7|Page
 Table of Contents

GADTC Vision, Mission, & Core Values ------------ 1

IBFS Vision, Mission, & Goals and Objectives -----------2
Foreword -----------------------------------------------------4
Preface --------------------------------------------------------5
Introduction ----------------------------------------------- - 6
Offline Etiquette ---------------------------------------------9
Unite Intended Learning Outcome ---------------------- 10
Pre-Assessment -------------------------------------------- 11
Lesson 1: Introduction to Merchandising Business ---- 13
Review Questions ------------------------------------------ 14
Lesson 2: Merchandising Inventory and Cost of Sales
(Periodic Inventory System) ------------ 38
Review Questions ------------------------------------------ 39
Lesson 3: Completing the Cycle for a
Merchandising Business ------------------------- 48
Review Questions ------------------------------------------ 49
Involve ----------------------------------------------------- 52
Examine ---------------------------------------------------- 58
Assessment Criteria/Rubric ----------------------------- 75
References ------------------------------------------------- 76

8|Page
Welcome On Board, Students!
Instructor: _________________________
Contact#: __________________________
Email Address: _______________________

Fasten your seatbelt and wear your mask. Don’t forget to

check-in your name on the following online platform
indicated below to access information updates of our
class.
FB Group Page: _______ FB Account: ________
Offline Class Etiquette to follow:
1) Write Legibly. Clearly write your answers on the
space provided in the module
2. Only use your own module. Do not let other
students use you own module.
3. Keep your module clean and tidy. Do not draw or
doodle on your module.
4. Always bring your module with you during
classes.
5. Do not destroy your module book.
6. Be Proactive: Write down your concerns,
clarification under the discussion page provided to be
addressed.

9|Page
 7. You can do self-study thru the internet. Do some
research of about the lessons in case you need more
information about the discussion.

GRADING SYSTEM:
Written Tasks
Performance Tasks
Final Exam
Total 100%

Passing Rate 65%

CONSULTATION SCHEDULE:

10 | P a g e
MODULE 1:
Learning Outcomes:

At the end of this module, you will be able to:

a. Describe merchandising activities and identify
the income components for a merchandising
entity.
b. Distinguish between income statements of
service and merchandising entities.
c. Illustrate the operating cycle of merchandising
entity.
d. Compare cash discounts and trade discounts
e. Summarize the treatment of transportation
costs considering the freight terms FOB
Destination, FOB Shipping Point, Freight
Prepaid and Freight Collect.
f. Explain the inventory systems of merchandising
entities and compare periodic and perpetual
inventory system.
g. Analyze and record transactions for
merchandise sales and purchases under periodic
inventory system.
h. Prepare the entries showing the effects of
Value-added tax on merchandising
transactions.

11 | P a g e
MERCHANDISING OPERATIONS

We are going to understand the underlying concept

of Accounting in Merchandising Operations. Also,
you will understand the purchasing and selling
activities of the business as well as their respective
entries. Lastly, you will be taught how to present a
video report paper as it will be part of your
assessment. Isn’t it exciting!
Student’s let’s bring it on!

12 | P a g e
Ta-da!
1. Read and carefully understand the discussion as
You are
activities/quizzes willdoing
followgreat! So far,
afterwards. so good!
Rubric is attached as your basis
of assessment. Should you have any questions or topics that isn’t clear to
you, you may write it down at the discussion part below. Rest assured
that it will be addressed, and feedbacks will be given afterwards.

Discussion Begins!

LESSON 1:
INTRODUCTION TO
MERCHANDISING
BUSINESS

“The Accounting Process of a service

concern is also followed in merchandising
business and even in manufacturing
concern; be it a Sole, Partnership or
Corporation”

13 | P a g e
Week: _______________Deadline: ______
Pre-Assessment: In a clean sheet of paper, please
answer the following questions. This test is required but
not graded.
1) How do you compare service concern from
merchandising business as for as the manner of
generating revenue is concerned?
2) In what aspect that purchase discounts and sales
discounts are similar?
3) Differentiate freight in from freight out?
4) Are trade discounts similar with cash discounts?
5) Why is there a need to conduct physical inventory
count under periodic inventory system?

14 | P a g e
15 | P a g e
16 | P a g e
17 | P a g e
18 | P a g e
19 | P a g e
20 | P a g e
21 | P a g e
22 | P a g e
23 | P a g e
24 | P a g e
25 | P a g e
26 | P a g e
27 | P a g e
28 | P a g e
29 | P a g e
 We have discussed the first lesson in
this module. So far, so good! Do you
have any concerns and questions that
you would want to discuss? Write it
down below. Let me hear from you.
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
If this space is not enough for you, don’t worry, you
can write it in a sheet of paper and don’t forget to
staple it in your module.
We have provided you a link for your additional
readings and references.
YouTube Videos:
https://www.youtube.com/watch?v=ozeo9j
EjL0Y&t=123s
https://www.youtube.com/watch?v=8qwWL
YmgTnc

30 | P a g e
Week: __________ Score: ______
Deadline: _______
Instruction: Write “T” if the statement is correct
and “F” if incorrect.
______ 1. The Sales Discount account is a contra-
income account and will have a debit balance.
______ 2. The perpetual inventory system requires
recording the cost of each sale as it occurs.
______ 3. The periodic inventory system relies on
a physical count of merchandise for its balance sheet
amount.
______ 4. The purchase of equipment not for resale
should be debited to the Purchases account.
______ 5. Advertising Expense appears as a
Distribution Cost on the income statement.
______ 6. The chart of accounts for a
merchandising entity differs from that of a service
entity.
______ 7. A credit term of “2/10, n/30” means that
the buyer may deduct 2% from the invoice if

31 | P a g e
payment is made within 10 days from the end of the
month.
______ 8. For cash sales, the operating cycle is
from Cash to inventory to Accounts Receivable and
back to Cash.
______ 9. The two main systems for accounting for
merchandise are periodic and perpetual.
______ 10. Transportation In is considered a cost
of merchandise purchased.
______ 11. Cash discounts are called Purchases
Discounts from the buyer’s viewpoint.
______ 12. The merchandise inventory account is
not affected when a sales allowance is granted.
______ 13. The ending inventory of one period is
the beginning inventory of the next period.
______ 14. The term freight prepaid or collect will
dictate who shoulders the transportation costs.
______ 15. Purchases Returns and Allowances is a
deduction from purchases.
______ 16. A validated deposit slip indicates that
cash and checks were actually deposited.
______ 17. If the seller is to shoulder the cost of
delivery, the term is stated as F.O.B. destination.

32 | P a g e
______ 18. Discounts offered to the buyer to
encourage early payment are trade discounts.
______ 19. Sales Returns and Allowances is
described as a contra-revenue account.
______ 20. The income statement of an entity that
provides services only will not have cost of goods
sold.
______ 21. Under the periodic inventory system,
Cost of Goods Sold is treated as an account.
______ 22. Under the periodic inventory system,
the purchases account is used to accumulate all
purchases of merchandise for resale.
______ 23. A physical inventory is usually taken at
the end of the accounting period.
______ 24. Goods should be recorded at their list
priceless any trade discounts involved.
______ 25. Under the perpetual inventory system,
the cost of merchandise is debited to merchandise
inventory at the time of purchase.
______ 26. Taking a physical inventory refers to
making a count of all merchandise on hand at a
particular time.
______ 27. Merchandise Inventory could include
that are in transit.

33 | P a g e
______ 28. Transportation out is included in the
Cost of Goods Sold Calculation.
______ 29. The bill of lading is a document
prepared by the seller detailing the terms of delivery.
______ 30. Under the periodic inventory system,
purchases of merchandise are not recorded in the
merchandise inventory system.

Instruction: In a clean sheet of paper, please

answer the follow problems below.

34 | P a g e
35 | P a g e
36 | P a g e
You made it! You are ready to our
next destination!

37 | P a g e
Discussion Begins
Lesson 2: MERCHANDISING
INVENTORY and COST OF SALE
(Periodic Inventory System)

MERCHANDISE INVENTORY

Under merchandising concern, the business is engaged in

buying and selling of goods or commodities. In the
process, not all goods that are purchased can be sold. The
goods that are left unsold at the end of the period are
called merchandise inventory. Usually, for a business to
start for the business for the first time, there is no
merchandise inventory beginning.

The two (2) classes of merchandise inventory,

merchandise inventory at the start of the period which is
called Merchandise Inventory, Beg. and merchandise
inventory at the end of the period which is called
Merchandise Inventory, End. Merchandise Inventory is
priced at cost and not a selling price.

38 | P a g e
Week: _______________Deadline: ______
Pre-Assessment: In a clean sheet of paper, please
answer the following questions. This test is required but
not graded.
1. Why is there a need to conduct physical inventory
count at the end of the period?
2. How is freight-in treated in the cost of sales
computation?
3. What is Net Sales? Cost of Sales? Gross Profit?
Profit (Loss)?
4. How is Net Sales arrived at? Cost of Sales? Gross
Profit? Profit (Loss)?
5. When is usually a merchandising company,
doesn’t have a “Beginning Inventory”?

39 | P a g e
40 | P a g e
41 | P a g e
42 | P a g e
43 | P a g e
 We have discussed the first lesson in this
module. So far, so good! Do you have any
concerns and questions that you would
want to discuss? Write it down below. Let
me hear from you.
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………

If this space is not enough for you, don’t worry, you

can write it in a sheet of paper and don’t forget to
staple it in your module.

We have provided you a link for your additional

readings and references.

YouTube Video:

https://www.youtube.com/watch?v=S8F7_uQ
Mpo4

44 | P a g e
Week: __________ Score: ______
Deadline: _______
Instruction: In a clean sheet of paper, please
answer the follow problems below.

45 | P a g e
46 | P a g e
 You made it! You are ready to our
next destination!

47 | P a g e
 Discussion Begins!
Lesson 3: COMPLETING THE
CYCLE OF A MERCHANDISING
BUSINESS

Week: _______________Deadline: ______

Pre-Assessment: In a clean sheet of paper, please
answer the following questions. This test is required but
not graded.
1) What are the two (2) methods of adjusting
merchandise inventory at the end?
2) What is direct extension methods of extending
inventories in the worksheet?
3) Why is profit extended to the credit sale of the
Statement of Financial Position in the worksheet?

48 | P a g e
ADJUSTING JOURNAL ENTRIES
We already have studied the topic, adjusting journal
entries in your Advanced Accounting Principles 1
and was able to learn adjustments on the following:
1. Accrual of income and expenses
2. Deferral of income and expenses
3. Provision for estimated uncollectible
accounts
4. Provision for depreciation of property and
equipment
5. Unused supplies adjustments

49 | P a g e
50 | P a g e
51 | P a g e
52 | P a g e
53 | P a g e
54 | P a g e
55 | P a g e
56 | P a g e
57 | P a g e
58 | P a g e
59 | P a g e
60 | P a g e
61 | P a g e
62 | P a g e
63 | P a g e
 We have discussed the first lesson in this
module. So far, so good! Do you have any
concerns and questions that you would
want to discuss? Write it down below. Let
me hear from you.
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………
…………………………………………………………

If this space is not enough for you, don’t worry, you

can write it in a sheet of paper and don’t forget to
staple it in your module.

We have provided you a link for your additional

readings and references.

YouTube Video:

https://www.youtube.com/watch?v=J4AIlCWqIJM&list=PLqG
hhQ3Ku9Cbrqxq6KxQ2x4Dg8-gzSHtY&index=29

64 | P a g e
Instruction: Write TRUE or FALSE.

65 | P a g e
Week: __________ Score: ______
Deadline: _______

66 | P a g e
…………………………………………………………………………

67 | P a g e
Week: __________ Score: _______
Deadline: _______

68 | P a g e
69 | P a g e
70 | P a g e
https://www.youtube.com/watch?v=9gwTH4Yme
8I

Name:_________________Month: _______
Date: ________ Course & Year:___________
Home Address: _______________________
Email Add: ______________Contact #: ____
Facebook Account: ____________________

Instruction: Prepare, Journal and Ledger Paper,

Worksheet and answer what is required on the problems
below.

71 | P a g e
72 | P a g e
73 | P a g e
74 | P a g e
Assessment Criteria/Rubrics

RUBRICS FOR ESSAYS

Needs Developing Sufficient (15) Above Average

Improvement (10) (20)
(5)
Clarity and The idea of the The central The central The central purpose
ideas student reflection purpose of the purpose of the of the student
is not well- student student reflection is clear
70% defined. Central reflection is reflection is and supporting
ideas are not identified. Ideas
clear and ideas ideas always are
focused to are generally are almost always well-focused.
support the focused in a wayalways focused Details are relevant,
thesis. Thoughts that supports in a way that enrich the work.
appear the thesis. supports the
disconnected. thesis. Relevant
details illustrate
the student’s
ideas.
Organization Information and Information and Information and Information and
ideas are poorly ideas are ideas are ideas are presented
20% sequenced (the presented in an presented in a in a logical sequence
student jumps order that the logical sequence which flows
around). The reader can which is naturally and is
reader has follow with followed by the engaging to the
difficulty minimum reader with little audience.
following the difficulty. or no difficulty.
thread of thought.
Mechanics There are five or There are no There are no There are no more
more misspellings more than four more than three than two misspelled
10% and/or systematic misspellings misspellings words or
grammatical and/or and/or grammatical errors
errors per page or systematic grammatical in the document.
8 or more in the grammatical errors per page
entire document. errors per page and no more
The readability of or six or more in than five in the
the work is the entire entire
seriously document. document. The
hampered by Errors distract readability of
errors. from the work. the work is
minimally
interrupted by
errors.

75 | P a g e
References
Aduana, N. L. (n.d.). Fundamentals of Accountancy, Business,
Management 2. Draft Only For Evaluation.

Ballada, W. (2018). Basic Financial Accounting and Reporting.

DomDane Publishers & Made Easy Books.

Licuanan, P. B. (2016). Teaching Guide for Senior High School

Fundamentals of Accountancy, Business, and
Management 2. CHED K to 12 Transition Program.
Quezon City, NCR, Philippines: Commision on Higher
Education.

Lopez, R. J. (2019). Financial Accounting and Reporting.

Davao City: MS Lopez Printing & Publishing.

Ong, F. L. (2016). Fundamentals of Accountancy, Business,

and Management 1 for Senior High School. C & E
Publishing, Inc.

76 | P a g e