Merchandising Accounting

MERCHANDISING COMPANY
• A merchandising company is an enterprise that buys
and sells goods to earn a profit.
1. Wholesalers sell to retailers and to consumers
2. Retailers sell to consumers.

• A merchandiser’s primary source of revenue is

sales, whereas a service company’s primary
source of revenue is service revenue.
Service Accounting
Merchandising Business
Income Statement of Service Business
Merchandising Business Income Statement
Difference between Service and
Merchandising
Merchandise Accounting Terms

Trade Discount-is a reduction to the published price of a product

• Chain Discount-refer to a series of trade discounts which are applied

in sequence to a products list price to arrive at a net selling price
• P100,000 E.g. 20%,10%,15%

100,000*80%*90%*85%=P61,200

Quantity Discount-is an incentive offered to a buyer that results in a

decreased cost per unit of goods or materials when purchased in
greater numbers
.
 Merchandise Accounting Terms

• Sales-refers to the revenues earned when a company sells its

goods, products, merchandise

• Sales Discount- a reduction in the price of a product or service that is

offered by the seller, in exchange for early payment by the buyer
• A contra revenue account

• Sales Returns- merchandise returned by a customer

• Sales Allowance-granted to a customer because the seller shipped
improper or defective merchandise
• The 2 accounts are often combined as Sales Returns and Allowances
 Merchandise Accounting Terms
• Freight out -is the transportation cost associated with the delivery
of goods from a supplier to its customers
• Part of the Selling Expense
 Merchandise Accounting Terms
• Merchandise Inventory-is the cost of goods on hand and available
for sale at any given time

• Purchases-A temporary account used in the periodic inventory

system to record the purchases of merchandise for resale

Purchase discount -is an offer from the supplier to the

purchaser, to reduce the payment amount if the payment is
made within a certain period of time
Purchase Return- merchandise returned to supplier
Purchase Allowance-granted by the supplier because
the seller shipped improper or defective merchandise
The 2 accounts are often combined as Purchase
Returns and Allowances
 Merchandise Accounting Terms
• Freight in -The shipping cost to be paid by the buyer of
merchandise purchased
Illustration
Periodic vs Perpetual
Freight Charges