Fundamentals of

Accountancy, Business
and Management 2
ACCOUNTING FOR
MERCHANDISING
BUSINESS
 ACCOUNTING FOR SALES:
A sale is a transfer of merchandise from one business or individual to another in
exchange for cash or a promise to pay cash. Sales procedures and documents can vary
greatly, depending on the nature and size of the business.
SALES TERMS:

Sales Discount – is a discount granted by the seller for early collection of a sale made on
credit. Sales discount encourage customers to make early and prompt payment of their
accounts. It is a contra-sales account reported as a deduction from sales on the income
statement.
Sales Returns and Allowances – are reductions in sales, resulting from merchandising
being returned by the customer or from seller’s reduction in the original sales price. It is a
contra-sales account reported as a deduction from sales on the income statement.
Transportation Out – this represents the transportation costs of merchandise sold and
shouldered by the business.
 ACCOUNTING FOR SALES:
Note: For simplicity, the amount ₱15,000 for the sales of merchandise and 12% Value-
added Tax (VAT) excluded is used for all the examples.

Example 1: June 2 – Sold merchandise worth ₱15,000 per Cash Sales Invoice No. 1001.
ACCOUNTING FOR SALES:
ACCOUNTING FOR SALES:
ACCOUNTING FOR SALES: