Title Layout

Subtitle
Freight Terms
• FOB Destination Freight Prepaid
• FOB Destination Freight Collect
• FOB Shipping Point Freight Prepaid
• FOB Shipping Point Freight Collect
Who is responsible of the freight cost
• FOB Destination Freight Prepaid - Seller
• FOB Destination Freight Collect - Seller
• FOB Shipping Point Freight Prepaid - Buyer
• FOB Shipping Point Freight Collect - Buyer
Who pays the freight cost
• FOB Destination Freight Prepaid - Seller
• FOB Destination Freight Collect - Buyer
• FOB Shipping Point Freight Prepaid - Seller
• FOB Shipping Point Freight Collect - Buyer
Accounting treatment
• FOB Destination Freight Prepaid - Seller records freight out
• FOB Destination Freight Collect - Seller records freight out and
the buyer will seek reimbursement from the seller since it is the
buyer who pays the shipping fee that should be the responsibility
of the seller.
• FOB Shipping Point Freight Prepaid - Buyer records Freight
in, but the seller will seek reimbursement of the transportation
paid because it should be the responsibility of the buyer to pay
for the freight.
• FOB Shipping Point Freight Collect - Buyer records freight in.
Illustration
• FOB Destination Freight Prepaid
• On March 15, 2020 ABC Company sold to Mr. Clean for 500,000
on credit with terms: Less 20%, 10%, 2/10,n/30. The freight cost
amounted to 12,000.
Invoice price= 500,000(.80)(.90)
= 360,000

Cash Discount = 360,000(.02)

= 7,200
• Seller’s book Buyer’s book
March 15, 2020
Accounts receivable 360,000 Purchases 360,000
Freight Out 12,000 Accounts payable 360000
Sales 360,000
Cash 12,000
March 25,2020
Cash 352,800 Accounts payable 360,000
Sales discount 7,200 Cash 352800
Accounts receivable 360,000 Purch. Disc. 7,200
Illustration
• FOB Destination Freight Collect
• On March 15, 2020 ABC Company sold to Mr. Clean for 500,000
on credit with terms: Less 20%, 10%, 2/10,n/30. The freight cost
amounted to 12,000.

Invoice price= 500,000(.80)(.90)

= 360,000

Cash Discount = 360,000(.02)

= 7,200
• Seller’s book Buyer’s book
Accounts Receivable 348,000 Purchases 360,000
Freight Out 12,000 Accts. Payable 348,000
Sales 360,000 Cash 12,000

OR
Accounts receivable 360,000 Purchases 360,000
Sales 360,000 Accounts payable 360,000

Freight out 12,000 Accounts Payable 12,000

Accounts receivable 12,000 cash 12,000

March 25, 2020

Cash 340,800 Accounts payable 348,000
Sales discount 7,200 Purch. Disc. 7,200
Accounts Receivable 348,000 Cash 340,800
Illustration
• FOB Shipping Point Freight Prepaid
• On March 15, 2020 ABC Company sold to Mr. Clean for 500,000 on
credit with terms: Less 20%, 10%, 2/10,n/30. The freight cost
amounted to 12,000.

Invoice price= 500,000(.80)(.90)

= 360,000

Cash Discount = 360,000(.02)

= 7,200
• Sellers bookBuyer’s book
Accounts receivable 372,000 Purchases 360,000
Sales 360,000 Freight In 12,000
Cash 12,000 Accts Payable 372000

OR
Accounts receivable 360,000 Purchases 360,000
sales 360,000 Accounts payable 360,000

Accounts receivable 12,000 Freight In 12,000

Cash 12,000 Accounts payable 12,000

March 25,2020

Cash 364,800 Accts. payable 372,000

Sales discount 7200 Cash 364800
Accounts receivable 372,000 Purch. Disc. 7200
Illustration
• FOB Shipping Point Freight Collect
• On March 15, 2020 ABC Company sold to Mr. Clean for 500,000 on credit
with terms: Less 20%, 10%, 2/10,n/30. The freight cost amounted to
12,000.

Invoice price= 500,000(.80)(.90)

= 360,000

Cash Discount = 360,000(.02)

= 7,200
• Seller’s Book Buyer’s Book
Accounts Receivable 360,000 Purchases 360,000
Sales 360,000 Freight In 12,000
Accts. payable 360000
Cash 12,000
March 25,2020
Cash 352,800 Accounts payable 360,000
Sales Discount 7,200 Cash 352,800
Accounts receivable 360,000 Purch. Disc. 7,200
How to record the payroll
• On August 31, 2020, the company paid the salaries of employees for the
2nd half of the month as follows:
Salaries of employees 100,000
Less; SSS premium-employees share 4,000
Philhealth premium- employee share 2,000
Pag-ibig premium- employee share 3,000
Withholding taxes1000
Employee advances 500 (10,500)
Amount paid 89,500
Entry
Salaries Expense 100,000
SSS premium payable 4,000
Philhealth premium payable 2,000
Pag-ibig premium payable3,000
Witholding Taxes payable 1000
Advances of employees 500
Cash 89,500
Employers share
• SSS for employee 6,000
• Philhealth for employee2,000
• Pag-ibig for employees 3000

• Entry:

SSS Contribution expense 6,000

Philhealth contribution expense 3,000
Pag-ibig contribution expense 2,000
SSS prmiums payable 6,000
Philhealth premiums payable 3,000
Pag-ibig premiums payable 2,000
Remittance to the different offices
SSS premiums payable 10,000
Philhealth premiums payable 5,000
Pag-ibig premiums payable 5,000
Witholding Taxes payable 1,000
Cash 21,000
Periodic Inventory System
• Used for fast moving items, small value items and with so
much variation such as grocery items.
Perpetual Inventory System
• Used for high priced items such as cars and jewelry.
Periodic Inventory system Perpetual Inventory system
1. To record purchase of merchandise worth 100,000, 2/10,n/45

Purchases 100,000 Inventory 100,000

Accounts payable 100,000 Accounts payable 100,000

2. To record payment of freight

Freight In 3,000 Inventory 3,000

Cash 3,000 Cash 3,000

3. To record return of merchandise worth 10,000

Accounts payable 10,000 Accts payable 10,000

Purchase Returns/Allow. 10,000 Inventory 10,000
Periodic Inventory system Perpetual Inventory system

4. To record payment within the discount period

Accounts payable 90,000 Accounts Payable 90,000

Cash 88,200 Cash 88,200
Purchase disc. 1,800 Inventory 1,800

If beyond the discount period

Accts payable 90,000 Accounts payable 90,000

Cash 90,000 Cash 90,000
Periodic Inventory system Perpetual Inventory system
5. To record sales on account merchandise costing 50,000 at 75,000,
2/10/n/30.

Accounts receivable 75,000 Accounts receivable 75000

Sales 75,000 Sales (At SP) 75,000

Cost Of Sales 50,000

Inventory (at cost 50,000

6. To record freight to deliver the goods to customer 1,000

Freight Out 1,000
Cash 1,000
Periodic Inventory system Perpetual Inventory system

5. To record merchandise at selling price of 7,500 with cost of 5,000.

Sales returns &Allow. 7,500 Sales Returns/ Allow. 7500

Accounts receivable 7,500 Accts receivable 7500

Inventory 5,000
Cost of Sales 5,000
Periodic Inventory system Perpetual Inventory system

6. To record collection of customer’s account within the discount period

Cash 66,150 Cash 66,150

Sales discount 1,350 Sales discount 1,350
Accts receivable 67,500 Accts Receivable 67,500

75,000-7500=67,500
=67500(.02)= 1,350
End of accounting period
• Physical count revealed inventory at Cost amounting to
46,800 at the end of the accounting period.

Periodic system
Inventory 46,800
Income summary 46,800
To set up the ending inventory.
Perpetual inventory system
Inventory
Debits Credits
100,000 10,000
3,000 1800
5,000 50,000
108,000 61,800
46,200
======
• If the physical count is equal to the ledger balance of the
inventory account – there is no entry.

• If the physical count is lesser amount than the physical count

The entry is :
Cost of Sales XX - if normal
Inventory XX
OR
Loss on inventory shortage XX - If abnormal
Inventory XX