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Created by

Alyanna Alvarez

Cards (142)

Merchandising business 
An enterprise that buys and sells goods to earn a profit
Merchandising business 
Primary source of revenue is sales
Buys and sells goods
Merchandise/Merchandise inventory 
Goods held for resale
A magazine is a periodical publication, which can either be printed or published electronically
Retail - sold in small quantities
Wholesale - sold in big quantities or volume
Categories of expenses in a merchandising company
Cost of Goods Sold (CGS)
Operating Expenses (OEx)
Gross Profit 
Sales less Cost of Goods Sold
Operating Cycle for a Merchandising Business 
1. Buy Merchandise Inventory
2. Sell Merchandise Inventory
3. Obtain Accounts Receivable
4. Receive Cash
Transactions in a merchandising business
Purchase merchandise
Purchase returns and allowances
Payment of freight
Partial payment of accounts to supplier/s
Full payment of account to supplier/s
Sale of inventory
Sales returns and allowances
Partial collection of customers account
Full collection of customers account
Purchase of supplies
Purchase of property, plant and equipment
Incurrence of expenses
Payment of expenses
Owner's investment of merchandise
Owner's withdrawal of merchandise
Merchandising businesses affect the community and our lives
Magazine 
A periodical publication, which can either be printed or published electronically
Most Essential Learning Competency
The learners shall be able to record transactions of a merchandising business in the general and special journals
Merchandising business 
Business engaged in merchandising activity
Merchandise 
Goods/items bought for the purpose of reselling it
Supplies 
Merchandise/goods used in its business operations
Merchandise inventory (stocks) 
Goods that remain unsold at the end of the accounting cycle
Merchandise inventory, end 
Current asset in the Statement of Financial Position
Merchandise inventory, beg 
Unsold goods from the previous accounting period
Cost of goods sold (COS) 
Amount of merchandise sold by the business for a given period
How to compute for the Cost of good sold (COS)
No details provided
Accounting Cycle 
Step 1. Transactions are identified and measured
Rule: Only financial transactions are recorded and that the amount can be measured
Journalization 
Special and general journals
Transactions in a merchandising business
Purchase merchandise
2. Purchase returns and allowances
3. Payment of freight
4. Partial payment of accounts to supplier/s
5. Full payment of account to supplier/s
6. Sale of inventory
7. Sales returns and allowances
8. Partial collection of customers account
9. Full collection of customers account
10. Purchase of supplies
11 Purchase of property, plant and equipment
12. Incurrence of expenses
13. Payment of expenses
14. owner's investment of merchandise
15. owner's withdrawal of merchandise
Perpetual Inventory System 
Detailed records of the cost of each item are maintained, and the cost of each item sold is determined from records when the sale occurs. Update of the quantity of items bought and sold.
Periodic inventory system 
Cost of goods sold is determined only at the end of an accounting period
Purchase of Merchandise: Periodic System
When merchandise is purchased for resale to customers, the account, Purchases, is debited for the cost of goods purchased.
2. Like sales, purchases may be made for cash or on account (credit).
3. The purchase is normally recorded by the purchaser when the goods are received from the seller.
Purchase Returns and Allowances
A purchaser may find the merchandise received to be unsatisfactory because the goods are: damaged or defective, of inferior quality, or not in accord with the purchaser's specifications. A debit memorandum is issued by the buyer to inform the seller that the seller's account has been debited because of unsatisfactory goods.
Payment for Freight Costs
FOB Shipping Point: Buyer pays freight costs. Freight-In is debited if buyer pays freight.
FOB Destination: Seller pays freight costs. Delivery Expense is debited if seller pays freight on outgoing merchandise to a buyer.
Purchase Discounts 
Credit terms may permit the buyer to claim a cash discount for the prompt payment of a balance due. A purchase discount is normally based on the invoice cost less returns and allowances.
Full Payment of Account and Purchase Discounts
If the credit terms show 2/10, n/30, a 2% discount is given if paid within 10 days (discount period); otherwise, the invoice is due in 30 days.
Freight-In 
Freight costs for the purchase of 20 units of computers
Purchase Discounts 
1. Credit terms may permit the buyer to claim a cash discount for the prompt payment of a balance due
2. If credit terms show 2/10, n/30 means a 2% discount is given if paid within 10 days (discount period); otherwise, the invoice is due in 30 days
3. A purchase discount is normally based on the invoice cost less returns and allowances
Purchase Discount Illustration 
The credit terms for the purchase of 20 computer units (₱200,000) is 2/10, n/30
On January 10, 2022, Magaling paid the account in full with Delta
Full Payment of Account and Purchase Discounts 
1. Accounts Payable 200,000
2. Purchase Discount 4,000
3. Cash 196,000
4. To record full payment of Delta, Charge Invoice No. 145 with 2% discount computed as ₱200,000 x 2%
Partial Payment to Supplier
1. Accounts Payable 100,000
2. Cash 100,000
3. To record full payment of Delta, Charge Invoice No. 145
Full Payment Without Discount 
1. Accounts Payable 200,000
2. Cash 200,000
3. To record full payment of Delta, Charge Invoice No. 145
Revenues 
Earned when the goods are transferred from seller to buyer
Sales should be supported by a receipt for cash sales, and charge invoice for credit sales or sales on account
The sales account is credited only for sales of goods held for resale. Sales of assets not held for resale (such as equipment, buildings, land,etc.) are credited directly to the asset account
Cash Sale 
1. Cash 36,000
2. Sales 36,000
3. To record OR No. 001 cash sale - Marie Cruz