ACCT 201 Periodic Inventory System Physically count inventory, usually atACCT 201 end of accounting period. No detailed records of the actual inventory are maintained during the accounting period.ACCT 201 Less costly than perpetual inventory method, but provides less information.
Periodic Inventory Method When Inventory isAccts. Payable Purchased Pur. Disc. xxx xxx Purchases xxx Pur. R&A Inventory xxx BI xxx The Inventory Account is not updated when inventory is purchased.
Cost of Goods Sold Component AmountBeginning Inventory $52,800Net Purchases 126,860Goods Available for Sale 179,660Less: Ending Inventory 48,300Cost of Goods Sold $131,660
ACCT 201 Perpetual Inventory System Continuous records are kept of theACCT 201 quantity and, usually, the cost of individual items as they are bought and sold. More effective for providingACCT 201 information about quantities and ensuring optimal customer service.
ACCT 201 Perpetual Inventory System In a perpetual inventory system, eachACCT 201 purchase and sale of merchandise is recorded in an inventory account. In this way, the inventory records always (perpetually) disclose theACCT 201 amount of inventory on hand the the amount sold.
ACCT 201 Merchandise Purchases On June, 20, Melton CompanyACCT 201 purchased $14,000 of merchandise inventory paying cash. GENERAL JOURNAL Page 55 Date Description PR Debit Credit Jun 20 Merchandise Inventory 14,000ACCT 201 Cash 14,000
ACCT 201Main Source, Inc. Invoice614 Tech Avenue Date NumberNashville, TN 37651 5/4/02 358-BI S o Barbee, Inc. Name: Seller Invoice date Purchaser Invoice l d Attn: Tom Bell Order number Credit terms Order number Credit terms Address: One Willow PlazaACCT 201 T Cookeville, Tennessee Freight terms Goods Invoice amount Goods Invoice amount o 38501 P.O. 167 Sales: 25 Terms 2/10,n/30 Ship: FedEx PrepaidItem Description Quanity Price AmountAC417 250 Backup System 500 $ 54.00 $ 27,000ACCT 201 Sub Total 27,000We appreciate your business! Ship Chg. - Tax - Total $ 27,000
ACCT 201 Trade Discounts Used by manufacturers andACCT 201 wholesalers to change selling prices without republishing their catalogs. Example JenCo, Inc. offers a 30% tradeACCT 201 discount on orders of 1,000 units or more of their popular product Racer. Each Racer has a list price of $5.25.
Purchase Discounts A deduction from the invoice price granted to induce early payment of the amount due.Terms Discount Period Credit PeriodTime Full amount Full amount due Due less discountPurchase or Sale Exhibit 4-7
Purchase Discounts 2/10,n/30 Number of Number of Days Days Otherwise, Otherwise,DiscountDiscount Discount Is Discount Is Net (or All) Net (or All) Credit CreditPercent Percent Available Available Is Due Is Due Period Period
ACCT 201 Purchase Discounts On May 7, Martin, Inc. purchasedACCT 201 $27,000 of Merchandise Inventory on account, credit terms are 2/10, n/30. GENERAL JOURNAL Page 49ACCT 201 Date Description PR Debit Credit May 7 Merchandise Inventory 27,000 Accounts Payable 27,000
ACCT 201 Purchase Discounts On May 15, Martin, Inc. paid theACCT 201 amount due on the purchase of May 7. GENERAL JOURNAL Page 55 Date Description PR Debit Credit May 15 Accounts payable 27,000 Cash 26,460ACCT 201 Merchandise inventory 540 $27,000 × 2% = $540 discount
ACCT 201 Purchase Discounts After we post these entries, theACCT 201 accounts involved look like this: Merchandise Inventory Accounts Payable 5/7 27,000 5/15 540 5/15 27,000 5/7 27,000ACCT 201 Bal. 26,460 Bal. 0
ACCT 201 Managing Discounts Annual Rate If we fail to take a 2/10, n/30ACCT 201 discount, is it really expensive? 365 / 20 X 2% = 36.5% Days in Percent paid to keepACCT 201 Year money Number of additional days before payment
Purchase Returns andACCT 201 Allowances Purchase Return . . .ACCT 201 Merchandise returned by the purchaser to the supplier. Purchase Allowance . . .ACCT 201 A reduction in the cost of defective merchandise received by a purchaser from a supplier.
Purchase Returns andACCT 201 Allowances On May 9, Barbee, Inc. purchasedACCT 201 $20,000 of Merchandise Inventory on account, credit terms are 2/10, n/30. GENERAL JOURNAL Page 34 Date Description PR Debit CreditACCT 201 May 9 Merchandise Inventory 20,000 Accounts Payable 20,000
Purchase Returns andACCT 201 Allowances On May 10, Barbee, Inc. returnedACCT 201 $500 of defective merchandise to the supplier. GENERAL JOURNAL JOURNAL Page 37 Page 37 Date Description Description PR Debit Credit PR Debit CreditACCT 201 May 10 Accounts payable 500 Merchandise Inventory 500
Purchase Returns andACCT 201 Allowances On May 18, Barbee, Inc. paid theACCT 201 amount owed for the May 9 purchase. GENERAL JOURNAL Page 61 Date Description PR Debit Credit May 18 Accounts payable 19,500 Merchandise inventory 390ACCT 201 Cash 19,110
ACCT 201 Transportation Costs On May 12, Barbee, Inc. purchasedACCT 201 $8,000 of Merchandise for cash and also paid $100 transportation costs. GENERAL JOURNAL Page 39 Date Description PR Debit CreditACCT 201 May 12 Merchandise Inventory 8,100 Cash 8,100
Recording PurchasesACCT 201 Information Matrix, Inc.ACCT 201 Total Cost of Merchandise Purchases For Year Ended December 31, 2002 Invoice cost of merchandise purchases $ 692,500 Less: Purchase discounts received (10,388) Purchase returns and allowances (4,275)ACCT 201 Add: Cost of transportation-in 4,895 Total cost of merchandise purchases $ 682,732
ACCT 201 Sales Transactions On March 18, TwoCom sold $25,000 of merchandise on account. The merchandise was carried inACCT 201 inventory at a cost of $18,000. GENERAL JOURNAL Page 3 Date Description PR Debit Credit Mar. 18 Accounts Receivable 25,000ACCT 201 Sales 25,000 Cost of Goods Sold 18,000 Merchandise Inventory 18,000
ACCT 201 Sales Discounts On June 8, Borey Co. sold merchandise costing $3,500 for $6,000 on account. Credit termsACCT 201 were 2/10, n/30. GENERAL JOURNAL Page 3 Date Description PR Debit Credit Jun 8 Accounts Receivable 6,000 Sales 6,000ACCT 201 Cost of Goods Sold 3,500 Merchandise Inventory 3,500
ACCT 201 Sales Discounts On June 17, Borey Co. received a check for $5,880 in full payment of the June 8 sale.ACCT 201ACCT 201
ACCT 201 Sales Returns and Allowances On June 12, Borey Co. sold merchandise costing $4,000 for $7,500 on account The credit terms were 2/10, n/30.ACCT 201 GENERAL JOURNAL Page 4 Date Description PR Debit Credit Jun 12 Accounts Receivable 7,500 Sales 7,500ACCT 201 Cost of Goods Sold 4,000 Merchandise Inventory 4,000
ACCT 201 Sales Returns and Allowances On June 14, merchandise with a sales price of $800 and a cost of $470 was returned to Borey. The return isACCT 201 related to the June 12 sale. GENERAL JOURNAL Page 3 Date Description PR Debit Credit Jun 14 Sales Returns and Allowances 800 Accounts Receivable 800ACCT 201 Merchandise Inventory 470 Cost of Goods Sold 470
ACCT 201 Sales Returns and Allowances On June 20, Borey received the amount owed to it from the sale of June 12.ACCT 201 GENERAL JOURNAL Page 6 Date Description PR Debit Credit Jun 20 Cash 6,566 Sales Discounts 134ACCT 201 Account Receivable 6,700
Exh.ACCT 201 6-11 Recording Sales InformationACCT 201ACCT 201 Sales discounts and returns Sales discounts and returns and allowances are and allowances are Contra Revenue accounts. Contra Revenue accounts.