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ACCOUNTING CYCLE OF
MERCHANDISING
BUSINESS
LERNING OBJECTIVE:
At the end of this chapter, students must be
C
able to:
- A company that buys and sells goods without changing their physical
form.
C
TWO INVENTORY SYSTEM IN PRACTICE:
1. PERIODIC SYSTEM- The periodic inventory system is called as such
because under this system, the “inventory” account is updated only
when a physical count of inventory is performed. Thus, the amounts
of inventory and cost of goods sold are determined only periodically.
Inventory ₱200
Cost of good sold ₱ 200 NO ENTRY
NET PURCHASE
Purchases xxx
C
Add:
Freight in xxx
Less:
Purchase Discount xxx
Purchase Returns & Allowances xxx ___
Net Purchase xxx
NET PURCHASE
Purchases ₱ 5,400
C
Add:
Freight in ₱ 765
Less:
Purchase Discount -
Purchase Returns & Allowances ₱ 150 _____
C Sales xxx
Less:
Sales Discount xxx
Sales Returns & Allowances xxx ___
Net Sales xxx
NET SALES
C
Sales ₱ 5,550
Less:
Sales Discount -
Sales Returns ₱ 450 ₱ 450
___
Net Sales ₱ 5,100
COGS/ COST OF GOOD SOLD FOR INVENTORY OF MERCHANDISING
BUSINESS
Gross
C Sales xxx
Less:
Sales Discount xxx
Sales Returns & Allowances xxx xxx
____
Net Sales xxx
Less: Cost of Good Sold xxx
____
Gross Profit xxx
GROSS PROFIT
C Inventory
Beginning balance xx
C Inventory
Beginning balance xx
C Inventory
Beginning balance xx
C Inventory
Beginning balance xx
Inventory
C
Beginning balance ₱150
Inventory
C
Beginning balance ₱150
Inventory
C
Beginning balance ₱150
Inventory
C
Beginning balance ₱150
Inventory
C
Beginning balance ₱150
TGAS = ₱ 4,415
Case #6: Increase in Inventory-
COGS
Inventory
C
Beginning balance ₱0
Inventory
C
Beginning balance ₱150