Net Sales is the net amount of revenue on sales after deducting the sales discounts and the

sales returns and allowances.

To compute for the NET SALES:
Sales P xxx
Less: Sales Discounts P xxx
Sales Returns and Allowances xxx xxx
Net Sales P xxx

Net Purchases is the net amount of purchases of merchandise after deducting the total
amount of purchase discounts and the purchase returns and allowance.

To compute for NET PURCHASES:

Purchases P xxx
Less: Purchase Discounts P xxx
Purchase Returns and Allowance xxx xxx
Net Purchases P xxx

Net Cost of Purchases this is the net amount of purchases after adding the transportation
cost of bringing in the goods to the place of business (freight-in).

To compute for NET COST OF PURCHASES:

Net Purchases P xxx
Add: Freight in xx
Net Cost of Purchases Pxxx

Cost of Goods Available for Sale the total cost of goods that are available for selling to the
customers. It include the cost of merchandise inventory at the start of the accounting year
(Merchandise Inventory ,Beg) and the net cost of merchandise purchased (Net Cost of
Purchases ) during the year.

To compute for COST OF GOODS AVAILABLE FOR SALE:

Merchandise Inventory, beg P xxx
Add: Net Cost of Purchases xxx
Cost of Goods Available for Sale P xxx

Cost of Goods Sold - this is the cost of merchandise sold during the year.
To compute for the COST OF GOODS SOLD:


Total Good Available for Sale P xxx
Less: Merchandise Inventory, end xxx
Cost of Goods Sold xxx

=============================================
On Merchandise Inventory, End

Under the periodic inventory system, it is necessary to conduct a physical count of the goods
unsold or still on hand at the end of the period to determine the (Merchandise Inventory End).
It is necessary that we know the Merchandise Inventor- ending, in order to determine the cost
of merchandise sold during the year.
Please note, that under the Periodic Inventory System, we do have a continuous monitoring
and counting of goods purchased and sold.--- It is under Periodic System, whenever the
business make a purchase of merchandise, it debit Purchases,-- when there is a returns,, it
credit Purchases Returns and Allowances--- The Merchandise Inventory account was
never really touched during the year.
so therefore, to establish the real amount of inventory left on hand at the end of the
accounting year, a physical count of the inventory is conducted.
The journal entry to establish the ending inventory of merchandise after the physical count is:

The Jounal Entry is:
Dec 31 Merchandise Inventory XXX
Income and Expense Summary XXX
Inventory count at year end
============================================
On Cost of Good Sold:

..If we know how much is merchandise inventory on hand at the end of the period , and
compare this amount with the total amount of merchandise available for sale during the year (
Merchandise Inventory Beg + Net Cost of Purchases ) then, automatically, you can compute for
amount sold during the year.

Merchandise Inventory Pxxx
Add: Net Cost of Purchases xxx
Total Good Available for Sale P xxx
Less: Merchandise Inventory, end xxx
Cost of Goods Sold xxx

Distribution Cost these are operating expenses related to marketing, selling and distribution,
and store expenses.
Administrative Expenses these are operating expenses related to the office administration
activities.
***If not mentioned whether the expense is distribution or administrationour assumption is,
it is administrative