In this section, the most essential terms peculiar for a merchandising concern type of business is

presented in order to have a common understanding as to how these terms are being used.
Please refer to these definitions in case you will encounter difficulty in understanding these terms.
1. Merchandise – refers to the goods that are intended for sale of a trading concern.
2. Sales – is a revenue account used to record income derived from the sale of goods or
merchandise of a merchandising or trading concern.
3. Sales Returns and Allowances/Purchase Returns and Allowances – refers to an account
used to record merchandise returned by the customer or buyer, or an adjustment to the price
of the goods sold/bought. This is called sales returns and allowances from the point of view
of the seller, purchase returns and allowances from the point from of view of the buyer.
4. Sales Discount/Purchase Discount –an account title use to record the amount deducted
from the price of the goods as an incentive for prompt payment. This is also called in
accounting as cash discount. From the point of view of the seller it’s called sales discount,
but from the point of view of the buyer it’s called purchase discount. Normally these documents
is recorded in the “General Journal”.
5. Credit period – refers to the term of sale normally express in number of days. Example if the
credit terms is 2/10, n/30, this means that the credit terms is 30 days.