Review:

merchandise company;
periodic vs perpetual
inventory system
Net vs Gross Method for Merchandise
Purchases or Sales (1 of 3)
• In Introduction of accounting, all of accounting methods must be
learned to gain wider understanding in accounting concept.
• However, in the accounting practice nowadays, some concepts are no
longer applicable due to the IFRS, such as: (1) credit term (e.g.2/10,
n/30); (2) LIFO inventory measurement methods, etc.
 Net vs Gross Method for Merchandise
Purchases or Sales (2 of 3)
• Merchandise Purchases and Sales on account, can be recorded by
both, net or gross method
• Example (perpetual):
Net method Gross Method

Aug 12. CV. ABC purchased Merchandise Inventory…..98.000 Merchandise Inventory…..100.000

merchandise on account Rp
100.000, 2/10, n/30.
Aug 30. CV. ABC paid for
purchase on Aug 12.
Account Payable………………..98.000
Merchandise Inventory….. 2.000
Account Payable………………..2.000
Account Payable……………100.000
Cash ………………………………100.000
Account Payable………………..100.000
Account Payable……………100.000
Cash ………………………………100.000

*CV.ABC does not utilize 2% discount

 Net vs Gross Method for Merchandise
Purchases or Sales (3 of 3)
• Example (perpetual):

Net method Gross Method

Aug 12. CV. ABC purchased Merchandise Inventory…..98.000 Merchandise Inventory…..100.000

merchandise on account Rp
100.000, 2/10, n/30.
Aug 22. CV. ABC paid for
purchase on Aug 12.
Account Payable………………..98.000
Account Payable……………98.000
Cash ………………………………98.000
Account Payable………………..100.000
Account payable……….……….2.000
Merchandise Inventory….…..2.000
Account Payable……………98.000
Cash ………………………………98.000

*CV.ABC utilizes the 2% discount

Main differences between periodic and
perpetual system:

• Purchase or sales transactions record.

• Purchase return and allowance record.
• Purchase discount record
• Freight in for merchandise purchase with FOB Shipping Point
Example (Assumption: gross method applied)
Transactions
June 5, Purchased merchandise on
account Rp 30.000, term 2/10, n/30
June 8. Returned merchandise
purchased on account on June 5, Rp
500
June 15. Paid for purchase on June 5,
less return Rp 500 and discount Rp
590 [(Rp 30.000-500) x 2%]
June 18. Sold merchandise on
account Rp 12.500, 1/10, n/30. Cost
of merchandise sold Rp 9.000
June 21. Received merchandise
return on account Rp 4.000 from sale
of June18 Cost of merchandise return
was Rp 2.800
Periodic
Purchases………………30.000
Account Payable……….30.000
Account Payable…………500
Purchases return
and allowances…………..500
Account Payable…………29.500
Cash……………………………… 28.910
Purchases discounts…………..590
Account Receivable……12.500
Sales……………………………….12.500
Sales Return & allowance…4.000
Account receivable…………...4.000
Perpetual
Merchandise Inventory….30.000
Account Payable…………….30.000
Account Payable………………….500
Merchandise Inventory……..500
Account Payable…………….29.500
Cash…………………….. 28.910
Merchandise Inventory……..590
Account Receivable……12.500
Sales……………………………….12.500
Cost of Merch.Sold………9.000
Merchandise inventory…….9.000
Sales Return & allowance…4.000
Account receivable…………...4.000
Merchandise inventory…….2.800
Cost of merch.sold…………….2.80
Transactions
June 22. Purchased merchandise Rp
15.000, FOB Shipping point, 2/15,
n/30 with prepaid freight of Rp 750
added to the invoice
June 28. Received Rp 8.415 payment
on account of June 18 sale, less return
of June 21 and discount of Rp 85 [(Rp
12.500-Rp4.000)x1%]
June 29. Received Rp 19.600 from
cash sales. The cost of merchandise
sold was Rp 13.800
Periodic
Purchases………………15.000
Freight in……………….. 750
Account Payable…………15.750
Cash………………..………….8.415
Sales Discount…………….. 85
Account Receivable……….8.500
Cash ………………………….19.600
Sales…………………………….. 19.600
Perpetual
Merchandise Inventory….15.750
Account Payable…………….15.750
Cash………………..………….8.415
Sales Discount…………….. 85
Account Receivable……….8.500
Cash ………………………….19.600
Sales…………………………….. 19.600
Cost of Merch.sold…….13.800
Merchandise inventory….13.800
Question?