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Merchandising Type

A merchandising business buys and sells goods to make a profit. It includes retailers that sell directly to consumers and wholesalers that sell in bulk to other businesses. A periodic inventory system does not continuously update inventory records but instead performs periodic updates. It differs from a perpetual inventory system which continuously updates records. Merchandising activities involve purchasing goods from suppliers and selling them to customers.

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Jubel Coronel
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0% found this document useful (0 votes)
36 views

Merchandising Type

A merchandising business buys and sells goods to make a profit. It includes retailers that sell directly to consumers and wholesalers that sell in bulk to other businesses. A periodic inventory system does not continuously update inventory records but instead performs periodic updates. It differs from a perpetual inventory system which continuously updates records. Merchandising activities involve purchasing goods from suppliers and selling them to customers.

Uploaded by

Jubel Coronel
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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MERCHANDISING TYPE

A merchandising business is one that buys and sells


merchandise or goods in order to make a profit.
Merchandise Inventory- is referred to as goods that
a company acquires for the purpose of reselling them
to customers.

Merchandising business include retailing( sells goods


directly to consumers ) and wholesaling
(sells goods in bulk to other businesses ).
Bookstore – buy and sell of books and supplies
Periodic inventory is a system of inventory in
which updates are made on a periodic basis.
This differs from perpetual inventory systems,
where updates are made as seen fit. In a
periodic inventory system no effort is made to
keep up-to-date records of either
the inventory or the cost of goods sold.
MERCHANDISING ACTIVITIES

PURCHASING SELLING
( BUYER ) (SELLER )
MERCHANDISING –Periodic Inventory
• What’s new ?
• new accounts
• new terms
• new transactions
• new source documents
• new emphasis on point of view
• new “ format” of income statement
BUYER - the following account titles are used
1. Purchases ( Dr )
2. Purchase Returns & Allowances ( Cr )
3. Purchase Discounts ( Cr )
4. Freight In ( Dr )
5. If FOB Shipping Point – buyer pays the freight
cost .
6. If “ Debit memo – Buyer issued the debit
memorandum for the defective goods returned.
SELLER - the following account titles are used
1. Sales ( Cr )
2. Sales Returns & Allowances ( Dr )
3. Sales Discounts ( Dr )
4. Freight Out ( Dr )
5. If FOB Destination Point – seller pays the freight cost.
6. If “ Credit memo” – Seller issued credit memorandum
for the defective goods returned
PERIODIC INVENYORY SYSTEM
PURCHASING ACTIVITIES ( BUYER )
1. When purchased of merchandise
Purchases - XXX
Cash / Accounts Payable – xxx
2. When the freight cost is paid
Freight In - xxx
Cash - xxx
3. When returned of defective merchandise
Cash / Accounts Receivable – xxx
Purchase Returns & Allowances - xxx
4. When the accounts of merchandise purchased is paid ( without
discount )
Accounts Payable - XXX
Cash – xxx
5. When the accounts of merchandise purchased is paid ( with
discounts )
Accounts Payable - xxx
Purchase discounts - xxx
Cash - xxx
SELLING ACTIVITIES ( SELLER )
1. When worth of merchandise is sold
Cash / Accounts Receivable - XXX
Sales – xxx
2. When the freight cost is paid
Freight Out - xxx
Cash - xxx
3. When defective merchandise are returned by customer
Sales Returns & Allowances – xxx
Cash / Accounts Receivable - xxx
4. When the merchandise sold on credit is paid ( without
discounts )
Cash - XXX
Accounts Receivable – xxx
5. When the merchandise sold on credit is paid ( with
discounts )
Cash - xxx
Sales discounts - xxx
Accounts Receivable - xxx
• MERCHANDISE INVENTORY – represents the goods
acquired for sale
Purchases
MERCHANDISE INVENTORY
Debit Credit
goods for sale
FREIGHT IN PURCHASE RETURNS & ALLOWANCES
“sub” “contra “
added to PURCHASE DISCOUNTS
“contra “
HOW TO COMPUTE NET PURCHASES
• Purchases - P XXXX
• Plus : Freight In - P XX xxxx
• Less: Purchase Ret.& Allow - XXX
• Purchase Discounts XXX
• NET PURCHASES P XXXX
SALES – is an account used to refer to gross receipts of
the business from the sale of merchandise.
It is used to record the sale of merchandise
Sales
SALES REVENUE
Debit Credit
SALES RETURNS & ALLOW retail
“contra “
SALES DISCOUNTS
“contra”
HOW TO COMPUTE NET SALES

•Sales - P XXXX
• Less: Sales Returns & Allowances - P XXX
• Sales Discounts - XXX
• NET SALES P XXXX
TRANSPORTATION COSTS
Shipping charges on merchandise sold )

Freight – refers to the cost of transporting


merchandise from the seller to the buyer.
Freight is also known as delivery charges.
Freight-In – it refers to the transportation cost
of the goods bought for sale. It is also known
as “ transportaion in “ account.
Freight- Out – it refers to the transportation
cost of the goods sold . It is also known as “
transportaion -out “ account.
FOB ( FREE ON BOARD )
FOB - The buyer and seller must reach an agreement
on who is responsible for paying any freight costs and
who bears the risk of loss during transit when the
merchandise is being shipped. This question basically
asks, “At what point does ownership transfer from the
buyer to the seller?” The point of transfer is called the
FOB point, and FOB stands for free on board
DISCOUNTS
Credit terms are a listing of the amounts & timing of
payments between a buyer and a seller, and the
discount percent if the payment is made within a certain
time period. The equation for setting up the terms is:
n/10 = EOM. The EOM means “end of month” and most
invoices are due for payment in 30 days, thus making
the EOM 30 days. The “n” ( NET ) in this case means
the discount percent if the payment is made within 10
days.
a ) 2 /10 , n / 30 – this means that a 2 % discount of the gross
invoice price is allowed if payment is made within 10 days
after the invoice date, and the gross price is due 30 days
from the invoice date.
b) 2 /10 , 1/20 , n /30 – a discount of 2 % is granted if the
invoice date is paid in 10 days ; a discount of 1 % is granted
if the invoice is paid from the 11th to the 20th day from the
invoice date; NO discount from the 21st to the 30th day. (
After 30 days it still unpaid , there will be interest added
depending on the agreement made ).
c) 2 / EOM , n /60 – this means that a 2 %
discount of the gross invoice price is allowed if
payment is made by the end of the month, and the
gross price is due 60 days from the invoice date.

d) 2 / 10 / EOM , n /60 – this means that a 2 % discount


of the gross invoice price is allowed if payment is
made by the 10th of the following month, and the
gross price is due 60 days from the invoice date.
Trade Discounts – a reduction in the list or catalog
price of merchandise. It is given as part of their sales
promotion and usually given to wholesalers for buying
frequently and large quantities. Since a trade discount
is granted at the point of sale, this is immediately
deducted from the list price ( not recorded in the
book) and the difference which is called gross invoice
price will be the basis for invoicing and recording.

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