Merchandising

"PERIODIC INVENTORY" SYSTEM (BUYER'S point of view)
1. Initial investment of merchandise
Debit: Merchandise inventory

Credit: Owner's capital
2. Purchase of merchandise
Debit: Purchases
Credit: Cash / Accounts Payable
3. Returns and allowances (defective merchandise)
Debit: Cash / Accounts Payable

Credit: Purchase returns and allowances
4. Partial payment
Debit: Accounts payable

Credit: Cash
5. Full payment

Credit: Cash
Or

Credit: Cash
Credit: Purchase discount
6. Additional investment of merchandise
Debit: Purchases
7. Withdrawal of merchandise
Debit: Owner's drawing

Credit: Purchases
PERIODIC INVENTORY" SYSTEM (SELLER'S point of view)
1. Sale of merchandise
Debit: Cash / Accounts receivable

Credit: Sales
Debit: Sales returns and allowances

Credit: Cash / Accounts receivable
3. Partial collection
Debit: Cash
Credit: Accounts receivable
4. Full collection
Debit: Cash
Or
Debit: Cash
Debit: Sales discount
~~~~~~~~~~~~~~~~~~~~~~~~~
"PERPETUAL" INVENTORY SYSTEM (BUYER'S point of view)
1. Initial investment of merchandise

2. Purchase of merchandise

Credit: Cash / Accounts Payable
Debit: Cash / Accounts Payable

Credit: Merchandise inventory
4. Partial payment

Credit: Cash
5. Full payment

Credit: Cash
Or

Credit: Cash
6. Additional investment of merchandise

7. Withdrawal of merchandise
Debit: Owner's drawing

*
"PERPETUAL" INVENTORY SYSTEM (SELLER'S point of view)
1. Sale of merchandise
Debit: Cash / Accounts receivable

Credit: Sales
Debit: Cost of goods sold

2. Return and allowances (defective merchandise)
RETURNS
1st entry
2nd entry
Credit: Cost of goods sold
ALLOWANCES
1st entry
No 2nd entry
3. Partial collection
Debit: Cash
4. Full collection
Debit: Cash
Or
Debit: Cash
Debit: Sales discount
~~~~~~~~~~~~~~~~~~~~~~~~~
#NewTopic
"FREIGHT" (Periodic system)
BUYER'S point of view
1. FOB SHIPPING POINT, COLLECT
Debit: Freight in
Credit: Cash
2. FOB DESTINATION, PREPAID

"No entry"
3. FOB SHIPPING POINT, PREPAID
Debit: Freight in
Credit: Accounts payable
4. FOB DESTINATION, COLLECT

Credit: Cash
OR
Debit: Accounts receivable (if purchase is made for CASH)

Credit: Cash
**
SELLER'S point of view
"No entry"
Debit: Freight out

Credit: Cash
Debit: Accounts receivable

Credit: Cash
Debit: Freight out

OR
Debit: Freight out

Credit: Accounts payable (if sale is made for CASH)
~~~~~~~~~~~~~~~~~~~~~~~~~
"FREIGHT" (Perpetual system)
BUYER'S point of view

Credit: Cash
"No entry"

Credit: Accounts payable

Credit: Cash
OR
Debit: Accounts receivable (if purchase is made for CASH)

Credit: Cash
SELLER'S point of view
"No entry"
Debit: Freight out

Credit: Cash

Debit: Accounts receivable
Credit: Cash
Debit: Freight out

OR
Debit: Freight out

Credit: Accounts payable (if sale is made for CASH)
**
NORMAL BALANCES:
DEBIT:
- Merchandise inventory
- Purchases
- Freight in
- Freight out
(contra accounts)
- Sales returns and allowances
- Sales discount
*
CREDIT:
- Sales
(contra accounts)
- Purchase returns and allowances
- Purchase discount
- FOB "SHIPPING POINT"

- FOB "DESTINATION"
- "COLLECT"
- "PREPAID"
**
COMBO 1
FOB shipping point, Collect

- si BUYER ang "dapat" magbayad
- si BUYER din ang nagbayad
COMBO 2
FOB destination, Prepaid
- si SELLER and "dapat" magbayad
- si SELLER din ang nagbayad
COMBO 3
FOB shipping point, Prepaid
- pero si SELLER muna ang nagbayad
COMBO 4
FOB destination, Collect
- pero si BUYER ang pinagbayad
**
#SampleSTORY
Nagkasabay tayo sa JEEP. Ang pamasahe ay P9.
Sinong dapat magbayad ng pamasahe ko?

E di AKO.
Sinong dapat magbayad ng pamasahe mo?

E di IKAW.
*Yan ang concept pag "FOB Shipping point" at "FOB Destination"
Kung sino ang "dapat" magbayad??
**
NGAYON,
Kumuha ako ng P9 sa bulsa ko para ibayad sa driver.
Kumuha ka din P9 sa bulsa mo para ibayad sa driver.
Ito na ang "ACTUAL" na pagbabayad natin ng pamasahe sa driver.
*Yan naman concept pag COLLECT at PREPAID.
Kung sino ang talagang naglabas ng pera pambayad sa driver.
**
#NewSCENARIO
PAANO kung inabonohan ko muna ang pamasahe mo?
Sinong "dapat" magbayad ng pamasahe mo?

Ans. IKAW parin.
Pero sinong naglabas ng pera para magbayad sa driver?

Ans. AKO.
Dahil inabonohan ko ang P9 na pamasahe mo, may obligation kang bayaran ako.
Scenario A:
May DATI kang utang saken na P91.
Idadagdag ko yung bagong utang mo saken na P9 dahil sa pamasahe.
Total na utang mo na saken ay P100 (91+9)
Scenario B:
Ako ang may utang sayo DATI na P91.
Nagkautang ka naman saken ngayon na P9 dahil sa pamasahe.
Imbis na bayaran ko ng buo yung utang ko, ibabawas nalang dun yung P9.
Kaya magiging P82 nalang ang ibabayad ko sayo (91-9=82)
**
#GoingBack
SELLER: Manila
BUYER: Cebu
Inventory: P100
Freight (transportation cost): P9
COMBO 1
FOB shipping point, Collect

- si BUYER din ang nagbayad
From Manila, ipapadala ni Seller ang inventory papuntang Cebu para matanggap ni Buyer.
Ang usapan, si BUYER ang "dapat" magbayad ng pamasahe na P9 (FOB SHIPPING POINT).
Tapos si BUYER din talaga ang naglabas ng pera para bayaran yung P9 na pamasahe. (COLLECT)
COMBO 2
FOB destination, Prepaid
- si SELLER din ang nagbayad
Ang usapan, si SELLER ang "dapat" magbayad ng pamasahe na P9 (FOB DESTINATION).
Tapos si SELLER din talaga ang naglabas ng pera para bayaran yung P9 na pamasahe. (PREPAID)
COMBO 3
FOB shipping point, Prepaid
- pero si SELLER muna ang nagbayad
Ang usapan, si BUYER ang "dapat" magbayad ng pamasahe na P9 (FOB SHIPPING POINT).
Pero inabonohan muna ni SELLER yung pamasahe na P9 from Manila, going to Cebu (PREPAID)
Kaya ang mangyayari, magiging P109 na ang makokoleta ni Seller.

Sale of inventory: P100
Plus freight: P9
Total of P109
COMBO 4
FOB destination, Collect
- pero si BUYER ang pinagbayad
Ang usapan, si SELLER ang "dapat" magbayad ng pamasahe na P9 (FOB DESTINATION).
Pero si BUYER ang pinagbayad ng P9 nag pamasahe (COLLECT).
Kaya ang mangyayari, magiging P91 nalang ang babayaran ni Buyer.

Purchase of inventory: P100
Minus yung binayaran niyang freight na P9.
Balance: P91
**
FOB = Free On Board
FOB Shipping Point: FREE or nakalibre ang shipper. Ang shipper ay si seller. Si seller ang libre.
Kaya si "BUYER" ang dapat magbayad ng freight.
FOB Destination: FREE or nakalibre kung sino ang makakatanggap ng goods/inventory sa destination. Ang
makakatanggap ay si Buyer kayasiya ang makakalibre sa freight.
Si "SELLER" ang dapat magbayad ng freight.
Collect: Si BUYER ang naglabas ng perang pambayad.
Prepaid: Si SELLER ang naglabas ng perang pambayad.

MERCHANDISING (PART 14)
"NORMAL OPERATING CYCLE"
- May CASH si business
- yung CASH ay pinambili ng INVENTORY
- yung INVENTORY ay binenta at naging ACCOUNTS RECEIVABLE. (or naging CASH agad - kung cash sales)
- yung ACCOUNTS RECEIVABLE ay kinolekta at naging CASH ulit.
May CASH na ulit si business
- yung CASH ay pinambili ng INVENTORY

- yung INVENTORY ay binenta at naging ACCOUNTS RECEIVABLE (or naging CASH agad - kung cash sales)
- yung ACCOUNTS RECEIVABLE ay kinolekta at naging CASH ulit.
YOU: "Parang inulit lang?" �
YES, tama ka! � Kaya siya tinawag na cycle. Paulit-ulit lang. �
Q. Kung ang NORMAL OPERATING CYCLE ng isang business ay "5 YEARS, anong magiging classification ng
RECEIVABLES sa ating Balance sheet (or Statement of Financial Position)??
Current assets ba? Or Noncurrent asset?
Ans.
Current asset pa rin. �
YOU: "May nabasa po ako na pag

- "12 months or less" => CURRENT
- "more than 12 months" => NONCURRENT
Yes, tama ka. Pero yan ay nag aaply sa tinatawag nating NON-TRADE RECEIVABLES.
#SUMMARY
12 months or less = CURRENT
(except TRADE RECEIVABLES na within the "NORMAL OPERATING CYCLE". Kahit more than 12 months pa,
CURRENT parin)
More than 12 months = NONCURRENT
**
DEFINITION OF TERMS
MERCHANDISE INVENTORY = paninda
PURCHASES = account na ginagamit pag bumili ka ng paninda.
PURCHASE "RETURNS" AND "ALLOWANCES" = account na ginagamit pag "defective" ang nabili mo.
(RETURNS - defective or may sira ang nabili mo kaya binalik mo)
(ALLOWANCES - defective or may sira ang nabili mo PERO hindi mo binalik. Binawasan nalang ang
babayaran mo)
PURCHASE DISCOUNT = account na ginagamit pag nagbayad ka ng maaga within the discount period.
(see TUTORIALS PART 11 about sa discount period)
FREIGHT IN = account na ginagamit para sa "transportation cost" ng binili mo (kung saan ikaw na buyer
ang "dapat" magbayad nito)
*
SALES = account na ginagamit pag nagbenta ka ng goods sa customers mo.
COST OF SALES or COST OF GOODS SOLD = account na ginagamit para "cost" ng nabenta mong goods sa
customers mo.
Pag sinabing "cost", ito ay wala pang tubo' or mark up.
SALES RETURNS AND ALLOWANCES = account na ginagamit pag "defective" ang binenta mo.
(RETURNS - defective or may sira ang binenta mo kaya binalik sayo)
(ALLOWANCES - defective or may sira ang binenta mo PERO hindi binalik sayo. Binawasan nalang ang
makokolekta mo)
SALES DISCOUNT = account na ginagamit pag nakakolekta ka ng maaga within the discount period.
(see TUTORIALS PART 11 about sa discount period)
FREIGHT OUT = account na ginagamit para sa "transportation cost" ng binenta mo (kung saan ikaw na
seller ang "dapat" magbayad nito)
RANSACTIONS (Mark-up on sales is 25%)
"TAC Bookstore" was formed on June 1, 2019. It is located in Manila.
June 1. Rose invested the following:
Cash 100,000
Merchandise (books) 125,000

Store equipment 25,000
Store furniture and fixtures 50,000
June 4. Purchased "books" from Edna, QUEZON CITY for 80,000 less 5. Terms: 2/5 n/eom; Freight of 350
was on terms FOB QUEZON CITY, PREPAID.
June 6. Issued a check for 20,000 in partial settlement of the account with Edna.
June 9 Settled the account with Edna in full.
July 2. Purchased "store supplies" from Lorna, ANTIPOLO CITY for 10,000 less 10 giving a 20% down
payment, balance on terms 2/10, n/30. Freight of 500 was on terms FOB MANILA, COLLECT
July 4. Received a credit memo from Lorna for 1,000 for an allowance granted for defective supplies sold.
July 11. Settled the account with Lorna in full.

August 6. Sold various nursery books to Victor, BAGUIO CITY for 20,000. Terms: COD. Freight terms were
FOB BAGUIO, PREPAID 700.
August 7. Victor received a 300 cash refund due to the return of some defective books.
August 9. Sold P50,000 worth of books to Felix, DAVAO CITY. Terms: 50% down payment, balance 2/10,
n/30. Freight terms were FOB MANILA, PREPAID 1,800
August 19. Felix settled its account in full.
August 25. 10,000 worth of various periodicals were sold to Olive, PASIG CITY. Terms: 2/10, n/30. Freight
terms were FOB MANILA, PREPAID P500.
August 29. Purchased additional books from Bryan 45,000. Terms: 2/10 n/30. Freight terms were FOB
MANILA, PREPAID 500.
ANSWERS:
"PERIODIC INVENTORY SYSTEM"
June 1
DEBIT: Cash 100,000
DEBIT: Merchandise inventory 125,000
DEBIT: Store equipment 25,000
DEBIT: Store furniture and fixtures 50,000
CREDIT: Rose, Capital 300,000
June 4
DEBIT: Purchases 76,000
CREDIT: Accounts payable 76,000
(80,000 x 95% = 76,000)
DEBIT: Freight in 350

CREDIT: Accounts payable 350
[ FOB shipping point (place of seller), Prepaid ]
*
June 6
DEBIT: Accounts payable 20,000
CREDIT: Cash 20,000
June 9
CREDIT: Purchase discount 1,520
CREDIT: Cash 54,830
76,000 + 350 - 20,000 = 56,350

76,000 x 2% = 1,520
56,350 - 1,520 = 54,830
~~~~~~~~~~
July 2
DEBIT: Store supplies 9,000
CREDIT: Cash 1,800
10,000 x 90% = 9,000

9,000 x 20% = 1800
9,000 - 1,800 = 7,200
DEBIT: Accounts payable 500

CREDIT: Cash 500
[ FOB destination (place of buyer), Collect ]

*
July 4
CREDIT: Store supplies 1,000
July 11
CREDIT: Store supplies 124
CREDIT: Cash 5,576
7,200 - 500 - 1,000 = 5,700

(7,200 - 1,000) x 2% = 124
5,700 - 124 = 5,576
Aug 6
DEBIT: Cash 20,000
CREDIT: Sales 20,000
DEBIT: Freight out 700

CREDIT: Cash 700
[ FOB destination (place of buyer), Prepaid ]
Aug 7
DEBIT: Sales returns and allowances 300
CREDIT: Cash 300
~~~~~~~~~~
Aug 9
DEBIT: Cash 25,000
DEBIT: Accounts receivable 25,000
50,000 x 50% = 25,000

CREDIT: Cash 1,800
Aug 19
DEBIT: Cash 26,300
DEBIT: Sales discount 500
CREDIT: Accounts receivable 26,800
25,000 + 1,800 = 26,800

25,000 x 2% = 500
26,800 - 500 = 26,300
~~~~~~~~~~
Aug 25
DEBIT: Accounts receivable 500

CREDIT: Cash 500
~~~~~~~~~~
Aug 29
CREDIT: Accounts Payable 45,000
"No entry for freight"
¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤¤
"PERPETUAL INVENTORY SYSTEM"
June 1
DEBIT: Cash 100,000
DEBIT: Merchandise inventory 125,000
DEBIT: Store equipment 25,000
DEBIT: Store furniture and fixtures 50,000
CREDIT: Rose, Capital 300,000
*
June 4
DEBIT: "Merchandise inventory" 76,000
(80,000 x 95% = 76,000)
DEBIT: "Merchandise inventory" 350

CREDIT: Accounts payable 350
June 6
CREDIT: Cash 20,000
June 9
CREDIT: "Merchandise inventory" 1,520
CREDIT: Cash 54,830
76,000 + 350 - 20,000 = 56,350

76,000 x 2% = 1,520
56,350 - 1,520 = 54,830
~~~~~~~~~~
July 2
DEBIT: Store supplies 9,000
CREDIT: Cash 1,800
10,000 x 90% = 9,000

9,000 x 20% = 1800
9,000 - 1,800 = 7,200
DEBIT: Accounts payable 500

CREDIT: Cash 500
[ FOB destination (place of buyer), Collect ]
July 4
CREDIT: Store supplies 1,000
July 11
CREDIT: Store supplies 124
CREDIT: Cash 5,576
7,200 - 500 - 1,000 = 5,700

(7,200 - 1,000) x 2% = 124
5,700 - 124 = 5,576
*
Aug 6
DEBIT: Cash 20,000
DEBIT: Cost of goods sold 15,000

CREDIT: Merchandise inventory 15,000
20,000 x 75% = 15,000
DEBIT: Freight out 700

CREDIT: Cash 700
Aug 7
DEBIT: Sales returns and allowances 300
CREDIT: Cash 300
DEBIT: Merchandise inventory 225

CREDIT: Cost of goods sold 225
300 x 75% = 225
~~~~~~~~~~
Aug 9
DEBIT: Cash 25,000
50,000 x 50% = 25,000

50,000 x 75% = 37,500

CREDIT: Cash 1,800
Aug 19
DEBIT: Cash 26,300
DEBIT: Sales discount 500
CREDIT: Accounts receivable 26,800
25,000 + 1,800 = 26,800

25,000 x 2% = 500
26,800 - 500 = 26,300
~~~~~~~~~~
Aug 25

10,000 x 75% = 7,500
DEBIT: Accounts receivable 500

CREDIT: Cash 500
~~~~~~~~~~
Aug 29
CREDIT: Accounts Payable 45,000
"No entry for freight"

Merchandising

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Merchandising

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"PERIODIC INVENTORY" SYSTEM (BUYER'S point of view)

1. Initial investment of merchandise

Debit: Merchandise inventory

3. Returns and allowances (defective merchandise)

Debit: Cash / Accounts Payable

Debit: Accounts payable

Debit: Accounts payable

Debit: Accounts payable

6. Additional investment of merchandise

Debit: Owner's drawing

PERIODIC INVENTORY" SYSTEM (SELLER'S point of view)

Debit: Cash / Accounts receivable

2. Returns and allowances (defective merchandise)

Debit: Sales returns and allowances

"PERPETUAL" INVENTORY SYSTEM (BUYER'S point of view)

1. Initial investment of merchandise

Debit: Merchandise inventory

Debit: Merchandise inventory

3. Returns and allowances (defective merchandise)

Debit: Cash / Accounts Payable

Debit: Accounts payable

Debit: Accounts payable

Debit: Accounts payable

6. Additional investment of merchandise

Debit: Merchandise inventory

Debit: Owner's drawing

Debit: Cash / Accounts receivable

Debit: Cost of goods sold

2. Return and allowances (defective merchandise)

"FREIGHT" (Periodic system)

BUYER'S point of view

1. FOB SHIPPING POINT, COLLECT

2. FOB DESTINATION, PREPAID

3. FOB SHIPPING POINT, PREPAID

4. FOB DESTINATION, COLLECT

Debit: Accounts payable

Debit: Accounts receivable (if purchase is made for CASH)

SELLER'S point of view

1. FOB SHIPPING POINT, COLLECT

2. FOB DESTINATION, PREPAID

Debit: Freight out

Debit: Accounts receivable

4. FOB DESTINATION, COLLECT

Debit: Freight out

Debit: Freight out

"FREIGHT" (Perpetual system)

BUYER'S point of view

1. FOB SHIPPING POINT, COLLECT

Debit: Merchandise inventory

2. FOB DESTINATION, PREPAID

Debit: Merchandise inventory

4. FOB DESTINATION, COLLECT

Debit: Accounts payable

Debit: Accounts receivable (if purchase is made for CASH)

SELLER'S point of view

1. FOB SHIPPING POINT, COLLECT

2. FOB DESTINATION, PREPAID

Debit: Freight out

3. FOB SHIPPING POINT, PREPAID

4. FOB DESTINATION, COLLECT

Debit: Freight out

Debit: Freight out

- FOB "SHIPPING POINT"

FOB shipping point, Collect