Accounting Principles - Midterm 3rd year 1st sem

1. Merchandising Operations
H0032
* Property of STI
Page 1 of 12
MERCHANDISING
OPERATIONS
Nature of Merchandising Business
Sales
– Cost of Goods Sold
Gross Profit
- Operating Expenses
Net Income
The Operating Cycle
Purchasing
Activity
Production
Activity
Sales
Activity
Collection
Activity

2. Merchandising Operations
H0032
* Property of STI
Page 2 of 12
Financial Statements for a Merchandising
Business
Multi-Step Income Statement
o Sales
o Sales returns and allowances
o Sales discounts
o Net sales
o Cost of goods sold
o Gross profit
o Other income and expense

3. Merchandising Operations
H0032
* Property of STI
Page 3 of 12
Financial Statements for a Merchandising
Business
Single-Step Income Statement
Statement of Owner’s Equity
Balance Sheet – Report Form

4. Merchandising Operations
H0032
* Property of STI
Page 4 of 12
Sales Transactions
Cash Sales
Cash xxx
Sales xxx
To record cash sales.
Cost of Goods Sold xxx
Inventory xxx
To record the cost of goods sold.
Credit card expense xxx
Cash xxx
To record service charges on credit card
sales.

5. Merchandising Operations
H0032
* Property of STI
Page 5 of 12
Sales Transactions
Cost of Goods Sold xxx
Inventory xxx
To record the cost of goods sold.
Accounts receivable xxx
Sales xxx
To record credit card sales
Cost of Goods Sold xxx
Inventory xxx
To record the cost of goods sold.
Cash xxx
Credit card expense xxx
Accounts receivable xxx
Accounts Receivable xxx
Sales xxx
To record sales on account.
Sales on Account

6. Merchandising Operations
H0032
* Property of STI
Page 6 of 12
Sales Transactions
Sales returns & allowances xxx
Accounts receivable xxx
To record credit memo.
Inventory xxx
Cost of Goods Sold xxx
Cost of merchandise returned, Credit Memo.
Cash xxx
Sales Discounts xxx
Accounts receivable xxx
Collection on receivable, less discount.
Sales returns & allowances xxx
Cash xxx
Sales Discount
Sales Returns & Allowances

7. Merchandising Operations
H0032
* Property of STI
Page 7 of 12
Sales Transactions
Credit Terms
Invoice for
P15,00
Terms:
2/10, n/30
If invoice is paid
within 10 days
of invoice date
If invoice is NOT
paid within 10
days of invoice
date
2% of invoice
amount is
allowed as a
cash discount
Full amount is
due within 30
days of
invoice date
P14,700
paid
P15,000
paid

8. Merchandising Operations
H0032
* Property of STI
Page 8 of 12
Purchase Transactions
Purchases Discount
Inventory xxx
Cash xxx
Purchases inventory from seller.
Inventory xxx
Accounts payable xxx
Purchase inventory on account.
Inventory xxx
Accounts payable xxx
Accounts payable xxx
Cash xxx
Inventory xxx
Accounts payable xxx
Cash xxx

9. Merchandising Operations
H0032
* Property of STI
Page 9 of 12
Purchase Transactions
Purchases Returns and Allowances
Accounts payable xxx
Inventory xxx
Inventory xxx
Accounts payable xxx
Purchased merchandise.
Accounts payable xxx
Inventory xxx
Returned portion of merchandise purchased.
Accounts payable xxx
Cash xxx
Inventory xxx
Paid invoice.

10. Merchandising Operations
H0032
* Property of STI
Page 10 of 12
TERMS:FOBDESTINATION
TERMS:FOBDESTINATION
TransportationCosts,SalesTaxesandTradeDiscounts
Seller
ShippingPoint
Buyer
Destination
TransportationTerms
SellerpaysfreightcostanddebitsTransportationOut
BuyerpaysfreightcostsanddebitsInventory
TITLE
passes
tobuyer
TITLE
passes
tobuyerFreightcost
Freightcost

11. Merchandising Operations
H0032
* Property of STI
Page 11 of 12
Transportation Costs, Sales Taxes and Trade
Discounts
Inventory xxx
Accounts payable xxx
Purchased merchandise, terms FOB shipping
point.
Inventory xxx
Cash xxx
Paid shipping cost on merchandise purchased.
Sales Tax
Accounts receivable xxx
Sales xxx
Sales tax payable xxx
Sales tax payable xxx
Cash xxx
Payment for sales tax collected during the nth
month.

12. Merchandising Operations
H0032
* Property of STI
Page 12 of 12
Merchandise Inventory Shrinkage
Adjusting entry
Cost of goods sold xxx
Inventory xxx