Two Merchandising Business Inventory Systems

Other Key Terms:

 Discount Period – is the period of time within which an invoice must be paid if a
discount is to be taken.
 Trade Discount –is a special discount from the published list prices offered by sellers to
large buyers.
 Cash or COD –this means that payment is required at the merchandise is delivered.
 2/10, n/30 – this means that a 2% discount of the gross invoice price is allowed if
payment is made within 10 days after the invoice date, and the gross price is due 30 days
from the invoice date.
 2/EOM,n/60 – this means that a 2% discount of the gross invoice price is allowed if
payment is made by the end of the month, and the gross price is due 60 days from
invoice date.
 Administrative Expenses – these are expenses that are incurred in the general and
administrative operations of the business. This includes office salaries, office supplies,
rental, insurance, and depreciation of office furniture and equipment
 FOB Destination – this means Free on Board at Destination. The seller has agreed to be
responsible for the freight charges for the merchandise until it reaches the buyers
destination.
 FOB Shipping Point – this means Free in Board at shipping point. The buyer has agreed
to be responsible for the freight charges for the merchandise from the supplier’s shipping
point.
 Freight Collect – this means that the buyer is to pay the freight when the merchandise
arrives.
 Freight Prepaid – this means that the seller has paid the freight on the goods at the time
of shipment.
 Credit Term – is the term when payments for the merchandise are to be made as agreed
on by the seller and the buyer.
 Credit Period – is the amount of time in which the buyer is allowed to pay.
 Debit Memorandum – a form used by a buyer to notify the creditor of a return of
merchandise or allowance for damaged merchandise.
 Credit Memorandum – a form used by a seller to notify the buyer that his account has
been credited for the return of merchandise or allowance for damaged merchandise.
 Net Sales – this is Total Sales deducted by Sales Returns and Allowances and Sales
Discounts.
 Gross Profit – this is the excess Net Sales over Cost of Goods Sold. This is sometimes
called Gross Profit on Sales or Gross Margin.
 Selling Expenses – these are expenses that are incurred directly in the selling
merchandise. This includes salesperson salaries, commissions, store supplied used,
advertising expense and depreciation of office furniture and equipment.
 MERCHANDISING BUSINESS SAMPLE PROBLEM

PROBLEM SOLVING:

June 1Purchased merchandise from Dave’s wholesalers for P2, 500 under credit terms of 2/10,
n/30 and FOB shipping point.
2 Received the merchandise and a bill for shipping of P150 from Ron’s shipping company.
The bill paid when received.
3 Sold P500 worth of goods for cash
5 Sold P750 worth of goods on credit to Mr. Burns with credit terms of 3/10, n/30 FOB
destination, and the goods cost P400.
6 Paid P100 for delivery of goods to Mr. Burns.
6 Received a P500 credit memo from Dave’s Wholesalers for a return of unsatisfactory
good.
11 Made a payment to Dave’s wholesalers less the return and applicable discount.
12 Made a sale to Mr. Ireland for 600 with credit terms of 3/10, n/30 FOB shipping point.
The good cost P350.
15 Received payment from Mr. Burns regarding the June 5 sale.
18 Issued a credit memo for P200 to Mr. Ireland for return of unsatisfactory antiques the
goods, valued at 75 were returned to inventory.
30 Received payment from Mr. Ireland regarding June 12 sale.
 SAMPLE JOURNAL OF PERIODIC

GENERAL JOURNAL
PAGE NUMBER GJ-1
With Explanations

CURRENT JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2019
June 1 Purchases P2500
Accounts Payable P2500
Explanation

2 Freight-In 150
Cash 150
Explanation

3 Cash 500
Sales 500
Explanation

5 Accounts Receivable 750

Sales 750
Explanation

6 Freight-Out 100
Cash 100
Explanation

6 Accounts Payable 500

Purchases Returns and Allowance 500
Explanation

11 Accounts Payable 2000

Cash 1960
Purchase Discounts 40
Explanation

12 Accounts Receivable 600

Sales 600
Explanation
 SAMPLE JOURNAL OF PERIODIC

GENERAL JOURNAL
PAGE NUMBER GJ-2
With Explanations

CURRENT JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2019
June 15 Cash 727.50
Sales Discount 22.50
Accounts Receivable 750
Explanation

18 Sales Returns and Allowances 200

Accounts Receivable 200
Explanation

30 Cash 400
Accounts Receivable 400
Explanation
 SAMPLE JOURNAL OF PERPETUAL

GENERAL JOURNAL
PAGE NUMBER GJ-1
With Explanations

CURRENT JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2019
June 1 Merchandise Inventory P2500
Accounts Payable P2500
Explanation

2 Merchandise Inventory 150

Cash 150
Explanation

3 Cash 500
Sales 500
Explanation

Cost of Goods Sold 300

Merchandise Inventory 300
Explanation

5 Accounts Receivable 750

Sales 750
Explanation

Cost of Goods Sold 400

Merchandise Inventory 400
Explanation

6 Freight-Out 100
Cash 100
Explanation

6 Accounts Payable 500

Merchandise Inventory 500
Explanation

11 Accounts Payable 2000

Cash 1960
Merchandise Inventory 40
Explanation
 SAMPLE JOURNAL OF PERPETUAL

GENERAL JOURNAL
PAGE NUMBER GJ-2
With Explanations

CURRENT JOURNAL ENTRIES

DATE DESCRIPTION REF DEBIT CREDIT
2019
June 12 Accounts Receivable P600
Sales P600
Explanation

Cost of Goods Sold 300

Merchandise Inventory 300
Explanation

15 Cash 725.50
Sales Discount 22.50
Accounts Receivable 750
Explanation

18 Sales Returns and Allowances 200

Accounts Receivable 200
Explanation

Merchandise Inventory 75
Cost of Goods Sold 75
Explanation

30 Cash 400
Accounts Receivable 400
Explanation