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  • Accounting Cycle For Merchandising Activities

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    Jaymart Ingreso
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    The document discusses the accounting cycle and objectives for merchandising activities, which involves buying and selling inventory for profit. It compares income statements and inventory systems for service and merchandising businesses. Examples are provided to illustrate the differences between periodic and perpetual inventory systems in recording purchase and sale transactions.

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    Accounting Cycle for Merchandising Activities

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    The document discusses the accounting cycle and objectives for merchandising activities, which involves buying and selling inventory for profit. It compares income statements and inventory systems for service and merchandising businesses. Examples are provided to illustrate the differences between periodic and perpetual inventory systems in recording purchase and sale transactions.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    22 views14 pages

    Accounting Cycle For Merchandising Activities

    Uploaded by

    Jaymart Ingreso
    The document discusses the accounting cycle and objectives for merchandising activities, which involves buying and selling inventory for profit. It compares income statements and inventory systems for service and merchandising businesses. Examples are provided to illustrate the differences between periodic and perpetual inventory systems in recording purchase and sale transactions.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 14

    Accounting Cycle

    for Merchandising
    Activities
    -the process is like the cycle for
    service activity.
    What are the objectives
    of merchandising?

    1. Buy and store the products that


    are needed by the customers.

    2. Second important objective of


    merchandising is the growth of
    the business and making the
    business profitable.
    Comparison of Income Statements
    Service Merchandising
    Revenue from Services xx Net Sales xx

    Less: Expenses (xx) Less: Cost of Sales (xx)

    Net Income /Loss xx /(xx) Gross Profi t xx

    Less: Expenses (xx)

    Operating Profi t /Loss xx /(xx) Add:


    Other Income xx

    Net Income /Loss xx /(xx)


    Perpetual Inventory System-
    A perpetual inventory system is
    a method of inventory management that
    records real-time transactions of received or
    sold stock through the use of technology.
    2 Methods in
    Recording
    Transactions Periodic Inventory System-
    a method of inventory valuation for
    financial reporting purposes in which a
    physical count of the inventory is
    performed at specific intervals.
    Purchases

    Purchase Discount

    Purchase Return & Allowances

    Sales
    Key to Sales Discount

    Remember! Sales Return & Allowances

    Trade Discount

    FOB Destination / FOB Shipping Point

    Freight in/ out


    Transportation Costs
    FOB FOB Destination, Freight Prepaid

    FOB FOB Shipping Point, Freight Collect

    FOB FOB Destination, Freight Collect

    FOB FOB Shipping Point, Freight Prepaid


    Comparison of Periodic & Perpetual Inventory System

    1. Sold merchandise on account costing P8,000 for P10,000; terms were 2/10, n/30.

    Periodic Perpetual
    Accounts Receivable P10,000 Accounts Receivable P10,000

    Sales P10,000 Sales P10,000

    Cost of Sales P8,000

    Inventory P8,000
    Comparison of Periodic & Perpetual Inventory System
    2. Customer returned merchandise costing P400 that had been sold on account for
    P500(part of the P10,000 sale).

    Periodic Perpetual
    Sales Return & Allowances 500 Sales Return & Allowances 500

    Accounts Receivable 500 Accounts Receivable 500

    Inventory 400

    Cost of Sales 400


    Comparison of Periodic & Perpetual Inventory System

    3. Received payment from customer for merchandise sold above.

    Periodic Perpetual
    Cash 9,310 Cash 9,310

    Sales Discount 190 Sales Discount 190

    Accounts Receivable 9,500 Accounts Receivable 9,500


    Comparison of Periodic & Perpetual Inventory System

    4. Purchased on account merchandise for resale for P6,000; terms were 2/10, n/30.

    Periodic Perpetual
    Purchases 6,000 Inventory 6,000

    Accounts Payable 6,000 Accounts Payable 6,000


    Comparison of Periodic & Perpetual Inventory System

    5. Paid P200 freight on the P6,000 purchase; terms were FOB Shipping point, freight
    collect.

    Periodic Perpetual
    Freight In 200 Inventory 200

    Cash 200 Cash 200


    Comparison of Periodic & Perpetual Inventory System

    6. Returned merchandising costing P300. (part of the purchase made).

    Periodic Perpetual
    Accounts Payable 300 Accounts Payable 300

    Purchase Return & Allowance 300 Inventory 300


    Comparison of Periodic & Perpetual Inventory System

    7. Paid for merchandise purchase, refer to no. 4.

    Periodic Perpetual
    Accounts Payable 5,700 Accounts Payable 5,700

    Purchase Discounts 114 Inventory 114

    Cash 5,586 Cash 5,586

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