MERCHANDISING BUSINESS

A merchant buys already-made products and sells

them for a profit.
Operating Cycle
 Purchased / Sold goods amounting to P 300,000

Buyer:
Purchases P 300,000
Accounts Payable / Cash P 300,000

Seller:
Accounts Receivable / Cash P 300,000
Sales P 300,000
 Returned / Accepted damaged goods, P 30,000

Buyer:
Accounts Payable P 30,000
Purchase Returns P 30,000

Seller:
Sales Returns P 30,000
Accounts Receivable P 30,000
 TRADE DISCOUNT / CASH DISCOUNT

• Trade discount is a certain percentage a manufacturer is

willing to reduce its list price for wholesalers or retailers.

• Cash discount is a deduction from the invoice price that

can be taken only if the invoice is paid within a specified
time.
 TRADE DISCOUNT / CASH DISCOUNT
• ABC Merchandising sold / purchased 10,000 units of
product A for P 60 per unit. Trade discounts: 20,10. Terms:
2/10, n /30

Buyer:
Purchases P 432,000
Accounts Payable P 432,000

Seller:
Accounts Receivable P 432,000
Sales P 432,000
 TRADE DISCOUNT / CASH DISCOUNT
• ABC Merchandising sold / purchased 10,000 units of product A for P 60 per unit. Trade
discounts: 20,10. Terms: 2/10, n /30

PAYMENT / COLLECTION:
Buyer:
Accounts Payable P 432,000
Cash P 423,360
Purchase Discount 8,640
Seller:
Cash P 423,360
Sales Discount 8,640
Accounts Receivable P 432,000
Beginning Inventory XXXXXX
Add: Net Purchases XXXXXX
Goods Available for Sale XXXXXX
Less: Ending Inventory XXXXXX
Cost of Goods Sold XXXXXX