MERCHANDISING YANTO, 2019

OPERATIONS
 Gross Sales
COMPARISON OF INCOME - Sales Discounts

STATEMENTS -Sales Returns

Net sales

SERVICE
SERVICE MERCHANDISING
MERCHANDISING
Revenues Gross SalesNet Sales P xx
Service Revenuesfrom PServices
xx
Sales Discounts
Minus (xx)
Other Income/GainsAdd xx Sales Returns (xx)
Cost of Sales
Net Sales P xx
Other
Total Income and/or
Revenues P xx Gains Cost of GoodsEquals
Sold (xx)
Expenses and Losses
Minus (xx) Gross Profit
Gross Profit P xx
OperatingAdd
Expenses
or minus(xx)
Profit Expenses
or (Loss) P xxLosses
and Operating Profit
Other Income orPExpenses
xx
Other Income xx
Equals Equals (xx)
Other Expenses
Profit or (Loss) Profit orProfit
(Loss) orP(Loss)
xx
 Other Income and Expenses – those
that are incidental or not related to the
MERCHANDISING major operation of the business
Gross Sales P xx Gross Sales – Total Amount of Sales that
Sales Discounts (xx) arise from sale of goods.
Sales Returns (xx) Sales Discounts – Cash Discounts (Point
Net Sales P xx of View of Seller)

Cost of Goods Sold (xx) Sales Returns - merchandise sent back

by a buyer to the seller
Gross Profit P xx
Cost of Goods Sold – cost of inventory
Operating Expenses (xx) the entity has sold to the customers
Operating Profit P xx Operating Expenses – expenses
Other Income xx incurred in the operation; classified into
selling and administrative expenses
Other Expenses (xx)
Profit or (Loss) P xx
OPERATING CYCLE OF A
MERCHANDISING BUSINESS – CASH
SALES

CASH

SALES PURCHASES

INVENTO
RY
OPERATING CYCLE OF A
MERCHANDISING BUSINESS –
CREDIT SALES
COLLECTIONS
CASH
ACCOUNT
S
PURCHASES
RECEIVA
BLE
SALES INVENTO
RY
 SOURCE
DOCUMENTS
SALES INVOICE
Is prepared by the seller of goods and
sent to the buyer. This contains the name
and address of the buyer, the date of sale
and information – quantity, description
and price- about the goods sold. It also
specifies the amount of sales and the
transportation and payment terms.
BILL OF LADING
Is a document issued by the carrier – a
trucking, shipping or airline – that
specifies the contractual conditions and
terms of delivery such as freight terms,
time, place and the person named to
receive the goods.
STATEMENT OF ACCOUNT
Is a formal
notice to the
debtor
detailing the
accounts
already due.
OFFICIAL RECEIPT
Evidences the receipt of cash by the
seller or the authorized representative. It
notes the invoices paid and other details
of payment.
DEPOSIT SLIPS
Are printed forms with depositor’s name, account
number and space for details of the deposit. A
validated deposit slip indicates that cash and
checks with the supplied details were actually
deposited or credited to the account holder.
A validated deposit slip indicates that cash and
checks with the supplied details were actually
deposited or credited to the account holder.
CHECK
Is a written order to a bank by the
depositor to pay the amount specified in
the check from his checking account to
the person named in the check. The
entity issuing the check is the payor
while the receiver is the payee.
CREDIT MEMORANDUM
Is a form used by the seller to notify
the buyer that his account is being
decreased due to errors or other
factors requiring adjustments.
PURCHASE REQUISITION
Is a written request to the purchaser
of an entity from an employee or
user department of the same entity
that goods be purchased.
PURCHASE ORDER
Is an authorization made by the buyer to
the seller to deliver the merchandise as
detailed in the form.
RECEIVING REPORT
Is a document containing information
about goods received form a vendor, it
formally records the quantities and
description of the goods delivered.
 STEPS IN A PURCHASE
TRANSACTION
PURCHASE
PURCHASE
REQUISITION SALES INVOICE
ORDER
FORM

ACCOUNTS RECEIVING
PAYMENT
PAYABLE REPORT

When to record Purchase?

…when title has passed (upon delivery)
TERMS OF TRANSACTIONS
Cash or On Credit
Credit period – a period of time is allowed for
payment.
“n/30” – 30 days from the invoice date
“n/eom” – until the end of the month
“n/10 eom” – 10 days after the end of the
month
TRADE DISCOUNTS
They encourage the buyers to purchase
products because of markdowns from the
list price.
Accounting entries are based on invoice
price not on List Price.
List Price xx
Less: Trade Discount (xx)
Invoice Price xx
TRADE DISCOUNTS:
ILLUSTRATION
Pinnacle Technologies quoted a list price
of P2,500 for each 64 gb flash drive, less
a trade discount of 20%. If Video
Fantastic ordered seven units, the
invoice price would be as follows:
List Price (P2,500 x 7) P 17,500
Less: 20% Trade Discount ( 3,500)
Invoice Price P 14,000
 TRADE DISCOUNTS:
ILLUSTRATION
Pinnacle Technologies List Price (P2,500 x 7) P 17,500
quoted a list price of
Less: 20% Trade Discount ( 3,500)
P2,500 for each 64 gb
flash drive, less a 14,000
trade discount of If Less: 10% Trade Discount ( 1,400)
Video Fantastic
12,600
ordered seven units,
the 20%, 10%, 5%. Less: 5% Trade Discount ( 630)
invoice price would be Invoice Price P 11,970
as follows:
CASH DISCOUNTS
For prompt payment
Computed on the net amount after the trade
discount
This practice improves the seller’s cash position by
reducing the amount of money in accounts
receivable.
“2/10” – the buyer may avail 2% if the invoice is
paid within ten days from the invoice date.
Discount Period – the period covered by the
discount
 CASH DISCOUNTS:
ILLUSTRATION
Pinnacle Technologies List Price (P2,500 x 7) P 17,500
quoted a list price of
Less: 20% Trade Discount ( 3,500)
P2,500 for each 64 gb
flash drive, less a 14,000
trade discount of If Less: 10% Trade Discount ( 1,400)
Video Fantastic
12,600
ordered seven units,
the 20%, 10%, 5%. Less: 5% Trade Discount ( 630)
invoice price would be Invoice Price P 11,970
as follows:
 CASH DISCOUNTS:
ILLUSTRATION
Pinnacle Invoice Price P 11,970
Technologies was
given a “3/10, Purchase Disct. (11,970x 3%) (359)
n/eom” term. If the Amount Due P 11,611
company pays within
the 10 days discount
period, the amount
due is equal to
___________.
TRANSPORTATION COSTS
Freight Bill – designates which party shoulders
the costs (FOB shipping point or FOB destination)
and whether the shipment is freight prepaid or
freight collect.
FOB – Free on Board
FOB Shipping Point – buyer shoulders shipping
costs; ownership passes from seller to buyer
when inventory leaves the seller’s place of
business. The buyer already owns the goods
while still in transit.
TRANSPORTATION COSTS
FOB Destination – the seller bears the
shipping costs; Title passes only when the
goods are received by the buyer at the point
of destination. While in transit, the seller is
still the owner of the goods
Freight Prepaid – the seller pays the
transportation costs before shipping the
goods sold.
Freight Collect – the freight entity collects
 WHO SHOULDERS
THE WHO PAYS THE
FREIGHT TERMS
TRANSPORTATION SHIPPER?
COSTS?

FOB Destination,
Seller Seller
Freight Prepaid
FOB Shipping Point,
Buyer Buyer
Freight Collect
FOB Destination,
Seller Buyer
Freight Collect
FOB Shipping Point,
Buyer Seller
Freight Prepaid
TRANSPORTATION
COSTS
Freight in – shipping costs borne by the
buyer, part of the cost of the inventory
Freight Out – shipping costs borne by the
seller, part of selling expense
 MERCHANDISING Gross Sales – Total Amount of
Sales that arise from sale of
Gross Sales P xx goods.
Sales Discounts (xx) Sales Discounts – Cash
Sales Returns (xx) Discounts (Point of View of
Net Sales P xx Seller)
Cost of Goods Sold (xx) Sales Returns - merchandise
Gross Profit P xx sent back by a buyer to the
Operating Expenses (xx) seller
Operating Profit P xx Cost of Goods Sold – cost of
Other Income xx inventory the entity has sold to
the customers
Other Expenses (xx)
Profit or (Loss) P xx Operating Expenses – expenses
incurred in the operation;
classified into selling and
administrative expenses
INVENTORY SYSTEMS -
PERPETUAL
The inventory account is continuously updated: at the
time of purchase, at the time of sales.
Both the inventory and cost of sales accounts receive
entries throughout the accounting period.
In the absence of appropriate technology, the
perpetual inventory system is more advisable for firms
that sell low-volume, high priced goods such as
motorcycles, jewelry and furniture.
Ending inventory should reconcile with actual physical
count.
INVENTORY SYSTEMS -
PERIODIC
It is primarily used by businesses that sell
relatively inexpensive goods and that are not yet
using computerized scanning systems to analyze
goods sold.
No entries are made to the inventory account as
the merchandise is bought and sold.

See journal entries illustrated in the book.

COST OF GOODS SOLD
Inventory, beg, P xx
Purchases xx
Purchase Discounts (xx)
Purchase Returns (xx)
Net Purchases xx
Freight In xx
Net Cost of Purchases xx
Goods Avail. For Sale P xx
Inventory, end (xx)
COGS P xx
 Net Cost
Beginning
of
Inventory
Purchases

GOODS AVAILABLE FOR SALE

Ending Cost of
Inventory Goods
Sold