#Accounting Tutorials

MERCHANDISING (PART 12)

"PRO-FORMA ENTRIES"

A. "PERIODIC INVENTORY" SYSTEM

B. "PERPETUAL INVENTORY" SYSTEM

- BUYER'S point of view

- SELLER'S point of view

**

#START

"PERIODIC INVENTORY" SYSTEM (BUYER'S point of view)

1. Initial investment of merchandise

Debit: Merchandise inventory

Credit: Owner's capital

2. Purchase of merchandise
Debit: Purchases

Credit: Cash / Accounts Payable

3. Returns and allowances (defective merchandise)

Debit: Cash / Accounts Payable

Credit: Purchase returns and allowances

4. Partial payment

Debit: Accounts payable

Credit: Cash

5. Full payment

Debit: Accounts payable

Credit: Cash

Or

Debit: Accounts payable

Credit: Cash

Credit: Purchase discount

6. Additional investment of merchandise

Debit: Purchases

Credit: Owner's capital

7. Withdrawal of merchandise

Debit: Owner's drawing

Credit: Purchases

PERIODIC INVENTORY" SYSTEM (SELLER'S point of view)

1. Sale of merchandise

Debit: Cash / Accounts receivable

Credit: Sales

2. Returns and allowances (defective merchandise)

Debit: Sales returns and allowances

Credit: Cash / Accounts receivable

3. Partial collection
Debit: Cash

Credit: Accounts receivable

4. Full collection

Debit: Cash

Credit: Accounts receivable

Or

Debit: Cash

Debit: Sales discount

Credit: Accounts receivable

~~~~~~~~~~~~~~~~~~~~~~~~~

"PERPETUAL" INVENTORY SYSTEM (BUYER'S point of view)

1. Initial investment of merchandise

Debit: Merchandise inventory

Credit: Owner's capital

2. Purchase of merchandise

Debit: Merchandise inventory

Credit: Cash / Accounts Payable

3. Returns and allowances (defective merchandise)

Debit: Cash / Accounts Payable

Credit: Merchandise inventory

4. Partial payment

Debit: Accounts payable

Credit: Cash

5. Full payment

Debit: Accounts payable

Credit: Cash

Or

Debit: Accounts payable

Credit: Cash

Credit: Merchandise inventory

6. Additional investment of merchandise

Debit: Merchandise inventory

Credit: Owner's capital

7. Withdrawal of merchandise

Debit: Owner's drawing

Credit: Merchandise inventory

*
"PERPETUAL" INVENTORY SYSTEM (SELLER'S point of view)

1. Sale of merchandise

Debit: Cash / Accounts receivable

Credit: Sales

Debit: Cost of goods sold

Credit: Merchandise inventory

2. Return and allowances (defective merchandise)

RETURNS

1st entry

Debit: Sales returns and allowances

Credit: Cash / Accounts receivable

2nd entry

Debit: Merchandise inventory

Credit: Cost of goods sold

ALLOWANCES

1st entry

Debit: Sales returns and allowances

Credit: Cash / Accounts receivable

No 2nd entry

3. Partial collection

Debit: Cash

Credit: Accounts receivable

4. Full collection

Debit: Cash

Credit: Accounts receivable

Or

Debit: Cash

Debit: Sales discount

Credit: Accounts receivable

~~~~~~~~~~~~~~~~~~~~~~~~~

#NewTopic

"FREIGHT" (Periodic system)

BUYER'S point of view

1. FOB SHIPPING POINT, COLLECT

Debit: Freight in
Credit: Cash

2. FOB DESTINATION, PREPAID

"No entry"

3. FOB SHIPPING POINT, PREPAID

Debit: Freight in

Credit: Accounts payable

4. FOB DESTINATION, COLLECT

Debit: Accounts payable

Credit: Cash

OR

Debit: Accounts receivable (if purchase is made for CASH)

Credit: Cash

**

SELLER'S point of view

1. FOB SHIPPING POINT, COLLECT

"No entry"

2. FOB DESTINATION, PREPAID

Debit: Freight out

Credit: Cash

3. FOB SHIPPING POINT, PREPAID

Debit: Accounts receivable

Credit: Cash

4. FOB DESTINATION, COLLECT

Debit: Freight out

Credit: Accounts receivable

OR

Debit: Freight out

Credit: Accounts payable (if sale is made for CASH)

~~~~~~~~~~~~~~~~~~~~~~~~~
"FREIGHT" (Perpetual system)

BUYER'S point of view

1. FOB SHIPPING POINT, COLLECT

Debit: Merchandise inventory

Credit: Cash

2. FOB DESTINATION, PREPAID

"No entry"

3. FOB SHIPPING POINT, PREPAID

Debit: Merchandise inventory

Credit: Accounts payable

4. FOB DESTINATION, COLLECT

Debit: Accounts payable

Credit: Cash

OR

Debit: Accounts receivable (if purchase is made for CASH)

Credit: Cash

*
SELLER'S point of view

1. FOB SHIPPING POINT, COLLECT

"No entry"

2. FOB DESTINATION, PREPAID

Debit: Freight out

Credit: Cash

3. FOB SHIPPING POINT, PREPAID

Debit: Accounts receivable

Credit: Cash

4. FOB DESTINATION, COLLECT

Debit: Freight out

Credit: Accounts receivable

OR

Debit: Freight out

Credit: Accounts payable (if sale is made for CASH)

**

NORMAL BALANCES:

DEBIT:
- Merchandise inventory

- Purchases

- Freight in

- Freight out

(contra accounts)

- Sales returns and allowances

- Sales discount

CREDIT:

- Sales

(contra accounts)

- Purchase returns and allowances

- Purchase discount

ang Alam ko Yung freight in

Supplier to business
Tas pag freight out business to customer