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Chapter 5
Accounting for
Merchandising
Operations
Prepared by Naomi Karolinski
Monroe Community College
and
Marianne Bradford
Bryant College
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 4 Merchandise Inventory 3,800
Accounts Payable 3,800
(To record goods purchased on
account, terms 2/10, n/30, from
Sellers Electronix)
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 8 Accounts Payable 300
Merchandise Inventory 300
(To record return of inoperable
goods received from Sellers
Electronix, DM No. 126)
• FOB Destination
1) Goods placed free on board at
buyer’s business
2) Seller pays freight costs
ACCOUNTING FOR FREIGHT
COSTS
• Merchandise Inventory is debited if
buyer pays freight.
• Freight-out (or Delivery Expense) is
debited if seller pays freight.
ACCOUNTING FOR FREIGHT
COSTS
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 6 Merchandise Inventory 150
Cash 150
(To record payment of freight,
terms FOB shipping point)
When the purchaser directly incurs the freight costs, the account
Merchandise Inventory is debited and Cash is credited.
ACCOUNTING FOR FREIGHT
COSTS
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 4 Freight-out (Delivery Expense) 150
Cash 150
(To record payment of freight on
goods sold FOB destination)
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 14 Accounts Payable 3,500
Cash 3,430
Merchandise Inventory 70
(To record payment within
discount period)
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
June 3 Accounts Payable 3,500
Cash 3,500
(To record payment with no
discount taken)
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 4 Cash
2,200
Sales
(To record daily cash sales) 2,200
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 4 Accounts Receivable
Sales 3,800
(To record credit sales to Beyer 3,800
Video per invoice #731)
• Sales discount
– Offer of a cash discount to a customer for the
prompt payment of a balance due
– Is a contra revenue account with a normal debit
balance
• Example: Credit sale has the terms 3/10, n/30, a 3%
discount is allowed if payment is made within 10
days. After 10 days there is no discount, and the
balance is due in 30 days.
CREDIT TERMS
T E R M S E X P L A N A T I O N
2/10, n/30 A 2% discount may be taken if payment is made
within 10 days of the invoice date.
GENERAL JOURNAL
Date Account Titles and Explanation Dr. Cr.
May 14 Cash 3,430
Sales Discounts 70
Accounts Receivable 3,500
(To record collection within 2/10,
n/30 discount period from Beyer
Video)
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
2005 (1)
Dec. 31 Sales 480,000
Income Summary 480,000
(To close income statement
accounts with credit balances)
CLOSING ENTRIES
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
2005 (2)
Dec. 31 Income Summary 140,000
Sales Returns and Allowances 12,000
Sales Discounts 8,000
Cost of goods sold 316,000
Store Salaries Expense 45,000
Rent Expense 19,000
Freight-out 7,000
Advertising Expense 16,000
Utilities Expense 17,000
Depreciation Expense 8,000
Insurance Expense 2,000
(To close income statement
accounts with debit balances)
CLOSING ENTRIES
GENERAL JOURNAL
Date Account Titles and Explanation Debit Credit
2005 (3)
Dec. 31 Income Summary 30,000
R. A. Lamb, Capital 30,000
(To close net income to capital)
(4)
31 R. A. Lamb, Capital 15,000
R. A. Lamb, Drawing 15,000
(To close drawings to capital)
a. purchases account
b. supplies account
c. merchandise inventory account
d. cost of goods sold account
Chapter5
Under a perpetual inventory system,
acquisition of merchandise for resale is
debited to the
a. purchases account
b. supplies account
c. merchandise inventory account
d. cost of goods sold account
Chapter5
MULTIPLE-STEP INCOME
STATEMENT
STUDY OBJECTIVE 5
a. operating expenses
b. cost of goods sold
c. sales discounts
d. cost of goods available for sale
Chapter5
Gross profit for a merchandiser is net sales
minus
a. operating expenses
b. cost of goods sold
c. sales discounts
d. cost of goods available for sale
Chapter5
PERIODIC INVENTORY
SYSTEMS
Appendix 5A
General Journal
Date Account Titles Debit Credit
May 9 Freight-in 150
Cash 150
General Journal
Date Account Titles Debit Credit
May 14 Accounts Payable 3,500
Purchase Discounts 70
Cash 3,430
General Journal
Date Account Titles Debit Credit
May 4 Accounts Receivable 3,800
Sales 3,800
General Journal
Date Account Titles Debit Credit
May 8 Sales Returns and Allowances 300
Accounts Receivable 300
General Journal
Date Account Titles Debit Credit
May 15 Cash 3,430
Sales Discounts 70
Accounts Receivable 3,500
Adjustments Columns
1 A merchandising company usually has the
same types of adjustments as a service
company
2 Work sheet adjustments b, c, and d are for
insurance, depreciation, and salaries
Adjusted Trial Balance - The adjusted trial
balance shows the balance of all accounts after
adjustment at the end of the accounting period
USING A WORK SHEET
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