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SOURCE DOCUMENTS IN A
MERCHANDISING BUSINESS
• Also known as Business Documents,
• Provides evidence that a business trans...
COMMONLY USED DOCUMENTS:
a. Purchase invoice
b. sales and purchase orders
c. delivery receipts
d. debit and credit memoran...
SALES INVOICE INFORMATION:
(taken from Annex C of BIR Revenue
Memorandum)
A. Name and contact details of the seller.
B. Ta...
SALES ORDER PREPARE SALES INVOICE
PURCHASE ORDER SALES ORDERPREPARE
2. Sales order is prepared when the buyer informs the ...
3. DELIVERY RECEIPT: document issued by
the seller to confirm if merchandise has
been delivered to the billing address.
CO...
6. DEBIT AND CREDIT MEMORANDUM:
CREDIT MEMO: A transaction that reduces Amounts Receivable from a customer
eg. The custome...
7. PAYMENT VOUCHER:
• attached to supporting documents that requires
payment (invoice, company's purchase order and
other ...
8. OFFICIAL RECEIPT: it acknowledge the
receipt of cash or check. Used by the
collecting party as evidence of payments.
Re...
• Merchandising transactions are recorded both in general and special journal.
• A normal debit balance is increased by a ...
TYPES OF
ACCOUNTS
EXAMPLES
ASSETS Cash, Accounts Receivable, Merchandise Inventory, Prepaid Insurance, Office
Supplies, St...
1. a. Purchase of merchandise on cash.
Purchases xx
cash xx
b. Purchase of Merchandise on account
Purchases xx
Accounts Pa...
3. Partial payment of account with the supplier
Accounts Payable xx
Cash xx
4. a. Full payment of account beyond discount ...
5. c. Sales of merchandise with down payment
Cash xx
Accounts Receivable xx
Sales xx
6. a. Sales returns and allowances (c...
8. a. Full collection of account beyond discount period
Cash xx
Accounts Receivable xx
b. Full collection of account withi...
10. a. (2) Returns on supplies purchase
Cash xx
Supplies xx
10. b. (1) Purchase of supplies on account
Supplies xx
Account...
11. b. (1) Purchase on equipment with down payment
Equipment xx
Cash xx
Accounts Payable xx
b. (2) Allowance granted on eq...
14. a. (1) Initial investment of merchandise by the owner
Merchandise Inventory xx
Owner, Capital xx
a. (2) Initial invest...
JOURNALIZING IN GENERAL AND SPECIAL JOURNAL
Four Common Types of Journal
1. Sales Journal (SJ): use to record sales of mer...
DATE (PURCHASED RELATED) TRANSACTIONS
JUNE 11 Purchase from A merchandise on cash basis, P10,000 [CV#005]
11 Paid freight ...
DATE (SALES – RELATED) TRANSACTIONS
JUNE 15 Sold to D merchandise on cash basis, P10,000 [OR#005]
Paid freight on merchand...
Source documents and journalizing process in a merchandising business
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Source documents and journalizing process in a merchandising business

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Journalizing is the 2nd step in Accounting Cycle of Merchandising Business. Source documents are important in this kind of business.

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Source documents and journalizing process in a merchandising business

  1. 1. SOURCE DOCUMENTS IN A MERCHANDISING BUSINESS • Also known as Business Documents, • Provides evidence that a business transaction had occurred. • It tracks the history of business’s accounting records.
  2. 2. COMMONLY USED DOCUMENTS: a. Purchase invoice b. sales and purchase orders c. delivery receipts d. debit and credit memoranda e. vouchers f. Official receipts 1. Purchase invoice: or bill. Issued by the seller to the buyer to indicate that merchandise has been delivered. Basis of recording sales revenue on the seller’s book (sales invoice) and purchases on the buyer’s book (purchase invoice)
  3. 3. SALES INVOICE INFORMATION: (taken from Annex C of BIR Revenue Memorandum) A. Name and contact details of the seller. B. Tax details of the seller C. Word “Invoice” D. Invoice number E. Name and contact details of the buyer F. Date of the invoice G. Credit terms H. Number of units delivered I. Unit of measure for goods delivered J. Description of goods K. Unit selling price of goods L. Total amount of goods M.Authorized signature.
  4. 4. SALES ORDER PREPARE SALES INVOICE PURCHASE ORDER SALES ORDERPREPARE 2. Sales order is prepared when the buyer informs the seller that he wants to buy from the seller through a purchase order • If the buyer does not prepare a purchase order. The sales order only includes the ff: a. name and contact details of the buyer b. description of goods c. number of units ordered.
  5. 5. 3. DELIVERY RECEIPT: document issued by the seller to confirm if merchandise has been delivered to the billing address. CONTENT: a. Name of contact details of the seller b. Tax details of the seller c. Word “Delivery Receipt” d. Receipt number e. Name and contact details of the buyer f. Date of the receipt g. Credit terms h. Number of units delivered i. Unit of measure for goods delivered j. Description of goods k. Authorized buyer signature
  6. 6. 6. DEBIT AND CREDIT MEMORANDUM: CREDIT MEMO: A transaction that reduces Amounts Receivable from a customer eg. The customer could return damaged goods. Credit memo request is a used in complaints If the price calculated for the customer is too high DEBIT MEMO: is a transaction that reduces Amounts Payable to a vendor because; you send damaged goods back to your vendor. Debit memo request is used in complaints If the prices calculated for the customer were too low.
  7. 7. 7. PAYMENT VOUCHER: • attached to supporting documents that requires payment (invoice, company's purchase order and other information needed to process the seller’s invoice for payment.) • an internal document used in a company's accounts payable in order to collect the necessary documentation and approval before paying a seller’s invoice. CASH VOUCHER: approval of payment in cash CHECK VOUCHER: approval of payment in check
  8. 8. 8. OFFICIAL RECEIPT: it acknowledge the receipt of cash or check. Used by the collecting party as evidence of payments. Required by the BIR. Failure to issue this may lead to understatement of revenues which is the basis of tax evasion. INFORMATION INCLUDED: a. Name and contact details of the seller b. Tax details of the seller c. Word “Official Receipt” d. Receipt number e. Name and contact details of the buyer f. Date of receipt g. Amount in number and words h. Sales invoice number or reference number i. Authorized signature
  9. 9. • Merchandising transactions are recorded both in general and special journal. • A normal debit balance is increased by a debit and decrease by a credit • A normal credit balance is increased by a credit and decrease by a debit. NORMAL DEBIT BALANCE Assets Contra Liability Owner, Drawing Contra Revenue Costs and expenses NORMAL CREDIT BALANCE Contra Asset Liabilities Owner, Capital Revenues Contra Cost STEP 2: JOURNALIZING
  10. 10. TYPES OF ACCOUNTS EXAMPLES ASSETS Cash, Accounts Receivable, Merchandise Inventory, Prepaid Insurance, Office Supplies, Store Furniture and Fixtures, Store Equipment, Office Equipment, Delivery Equipment, Transportation Equipment CONTRA ASSETS Allowance for Doubtful Accounts, Accumulated Depreciation – Store Furniture and Fixture, Store Equipment LIABILITIES Accounts Payable, Unearned Sales Revenue REVENUES Sales Revenue CONTRA REVENUES Sales Returns and Allowances, Sales Discounts COST AND EXPENSES Purchases, Freight-in, Freight-out, Sales Salaries, Office Supplies Expense, Store Supplies Expense CONTRA COST Purchase Returns and Allowances, Purchase Discounts
  11. 11. 1. a. Purchase of merchandise on cash. Purchases xx cash xx b. Purchase of Merchandise on account Purchases xx Accounts Payable xx c. Purchase of merchandise with down payment Purchases xx Cash xx Accounts Payable xx 2. a. Purchase returns and allowances (cash basis) Cash xx Purchase Returns and Allowances xx b. Purchase returns and allowances (on account) Accounts Payable xx Purchase Returns and Allowances xx c. Purchase returns and allowances (with down payment) Accounts Payable xx Purchase Returns and Allowancesxx
  12. 12. 3. Partial payment of account with the supplier Accounts Payable xx Cash xx 4. a. Full payment of account beyond discount period Accounts Payable xx Cash xx b. Full payment of account within discount period Accounts Payable xx Cash xx Purchase Discount xx 5. a. Sale of merchandise on cash basis Cash xx Sales xx b. Sale of merchandise on account Accounts Receivable xx Sales xx
  13. 13. 5. c. Sales of merchandise with down payment Cash xx Accounts Receivable xx Sales xx 6. a. Sales returns and allowances (cash basis) Sales Returns and Allowances xx cash xx b. Sales returns and allowance (on account) Sales Returns and Allowances xx Accounts Receivable xx c. Sales returns and allowances (with down payment) Sales Returns and Allowances xx Cash xx 7. Partial collection of customer account Cash xx Accounts Receivable xx
  14. 14. 8. a. Full collection of account beyond discount period Cash xx Accounts Receivable xx b. Full collection of account within discount period Cash xx Sales Discount xx Accounts Receivable xx 9. a. Payment of freight on merchandise purchase Freight – out xx Cash xx b. Payment of freight on merchandise sold Freight – in xx Cash xx 10. a. (1) Purchase of supplies on cash basis Supplies xx Cash xx
  15. 15. 10. a. (2) Returns on supplies purchase Cash xx Supplies xx 10. b. (1) Purchase of supplies on account Supplies xx Accounts Payable xx b. (2) Returns of supplies purchase Accounts Payable xx Supplies xx 11. a. (1) Purchase of equipment on cash basis Equipment xx Cash xx a. (2) Allowance granted on equipment purchase Cash xx Equipment xx
  16. 16. 11. b. (1) Purchase on equipment with down payment Equipment xx Cash xx Accounts Payable xx b. (2) Allowance granted on equipment purchase Accounts Payable xx Equipment xx 12. Incurrence of expenses ________Expense xx ________Payable xx 13. (1) Payment of expense ________Expense xx Cash xx (2) Payment of expense (already recorded in #12) ________Payable xx Cash xx
  17. 17. 14. a. (1) Initial investment of merchandise by the owner Merchandise Inventory xx Owner, Capital xx a. (2) Initial investment of merchandise with liability Merchandise Inventory xx Accounts Payable xx Owner, Capital xx 14. b. Additional investment of merchandise by the owner Purchases xx Owner, Capital xx 15. Withdrawal of merchandise by owner Owner, Drawing xx Purchases xx
  18. 18. JOURNALIZING IN GENERAL AND SPECIAL JOURNAL Four Common Types of Journal 1. Sales Journal (SJ): use to record sales of merchandise on account. 2. Purchase Journal (PJ): use to record purchase of merchandise on account. 3. Cash Receipt Journal (CRJ): use to record receipt of cash from whatever source. 4. Cash Disbursement Journal (CDJ): use to record payment of cash for whatever purpose. 5. General J0urnal (GJ): use to record transactions which cannot be recorded on any of the specialized journal. NOTE: CV (chech voucher), SI (Sales Invoice), OR (Official receipt)
  19. 19. DATE (PURCHASED RELATED) TRANSACTIONS JUNE 11 Purchase from A merchandise on cash basis, P10,000 [CV#005] 11 Paid freight on merchandise purchased from A, P800 [CV#006] 12 Purchased from B merchandise worth P15,000 on terms 2/10, n/30 13 Purchased from C merchandise worth P20,000 on terms, 50% down, balance 2/10, n/30 [CV#008] 14 Returned P500 worth of merchandise purchased from A [OR#004] 15 Returned P1,000 worth of merchandise purchased from B 16 Returned P1,500 worth of merchandise purchased form C 17 Paid P2,000 in partial payment of account with C [CV#010] 22 Paid in full account with B [CV#012] 30 Paid in full account with C [CV3013]
  20. 20. DATE (SALES – RELATED) TRANSACTIONS JUNE 15 Sold to D merchandise on cash basis, P10,000 [OR#005] Paid freight on merchandise sold to D, P800 [CV#009] 16 Sold to E merchandise worth P15,000 on terms 2/10, n/30 [SI#001] 17 Sold to F merchandise worth P20,000 on terms 50% down, balance 2/10, n/30 [OR#006] 18 Received the return of P500 worth of merchandise sold to D [CV#011] 19 Received the return of P1,000 worth of merchandise sold to E 20 Received the return of P1,500 worth of merchandise sold to F 21 Collected P2,000 from F for partial payment of account [OR#007] 26 Collect in full the account with E [OR#008] 30 Collect in full the account with F [OR#009]

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