ACCOUNTING

T-accounts

Asset Account
Cash- companys operating checking account, which the
business uses to
receive customer payments and pay business expenses,
and imprest
accounts, in which the company maintains a fixed
amount of cash
such as petty cash. (Petty cash-bills and coins kept for
insignificant
daily expenses. E.g, buying toilet paper, or bond
papers.)
Accounts Receivable-all money customers owe to a business
for a
completed sales transaction
Inventory- any goods available for sale, raw materials used
Prepaid Insurance
Investments
Fixed Assets- the companys property, plant and equipments
and long lived
assets(company-owned car, land, buildings, office
equipment
& computers)
Goodwill
Prepaid Expenses
Liability Account
Notes Payable
Loans Payable
Accounts Payable-amount of money the company owes to
its vendors
Salaries
Wages Payable

 Payroll Liabilities-amount of money the company owes to its

employees
Interest Payable
Income Taxes Payable
Equity Account
Retained Earnings: result of income and dividend
transactions
Paid-in capital
Stock: pieces of the corporation
Additional paid-in capital: amount of money the investors
pay over the
stocks par value
Treasury Stock: a companys own stock that it buys back
from investors (Note: Treasury Stock shows up on the
balance sheet as a reduction in Equity.)
*Debit cash- cash received
*Credit cash-cash paid out
Income statement components
Revenue: inflow of assets (e.g.,cash, A/R). Revenue shows up as sales, gross sales or gross receipts.
Cost of goods sold(COGS): all cost directly tied to any product a company makes or sells starting from raw
materials
Operating Expense: expenses a company incurs that relate to central operations and are not directly tied to
COGS

Selling Expenses: any expenses a company incurs to sell its goods or services to customers(e.g.,salaries and
commissions paid to sales staff; advertising expense; store supplies; and depreciation of a retail shops
furniture, equipment and store fixtures.)

General and administrative (G&A) expenses: all expenses a company incurs to keep up the normal business
operations.
Other Income and Expense: all other income the company brings in. (e.g., buying new equipments and selling
the old one)

Interest Expense: cost of using borrowed funds for business operations, expansion and cash flow.
Loss on disposal of a fixed asset: money lost on the sale of asset

MERCHANDISING

Net sales - Cost of Goods Sold= Gross Profit

Gross Profit - Expenses= Net Income
Income Statement
Net sales *minus*
Cost of Goods Sold *equals*
Gross Profit *minus*
Expenses *equals*
Net Income
*Company Name*
Computation for Gross Profit
For Year Ended December 31, 20xx
Sales
Less: Sales discounts
Sales Returns and Allowances
Net Sales
Cost of Goods Sold
Gross Profit

0000
0000
0000

0000
0000
0000
0000

Merchandising Journal Entries Samples

On November 2, Z-mart purchased merchandise of 1,200 on credit terms of 2/10,n/30.
Nov. 2 Merchandise Inventory
Accounts Payable
Purchased merchandise on credit,
invoice dated,Nov. 2, terms 2/10, N/30..

1,200
1,200

On November 12, Z-mart paid the 1,200..

Nov. 12

Accounts Payable
Merchandise Inventory (2%*1200)
Cash (1200-24)
Paid for 1,200 merchandise less 24.

1,200
24
1,176

(For Purchase Allowances)

On November 15, Z-Mart (buyer) issues a $300 debit memorandum for an allowance from Trex for defective

merchandise.
Nov. 15 Accounts Payable
Merchandise Inventory
Allowance for defective
merchandise.

300
300

(For Purchase Returns)

Z-Mart purchases $1,000 of merchandise on June 1 with
terms 2/10, n/60. Two days later, Z-Mart returns $100 of goods before paying the invoice. When Z-Mart later
pays on June 11, it takes the 2% discount only on the $900 remaining balance.
Jun 1 Merchandise Inventory
Accounts Payable
Purchased merchandise on credit terms.
Invoice dated June 1 of terms 2/10, n/60.
Jun 3 Accounts Payable
Merchandise Inventory
Returned Merchandise to seller.

1000
1000

100
100

Jun 11 Accounts Payable

Merchandise Inventory
Cash
Paid for 900 merchandise less 18.

900
18
882

(For Sales)
Z-Mart sold $2,400 of merchandise on credit on November 3.
Nov. 3 Accounts Receivable
Sales
Sold merchandise on credit.

2,400
2,400

(For sales Discounts)

Z-Mart completes a credit sale for $1,000 on November 12 with terms of
2/10, n/60.
Nov. 12 Accounts Receivable
Sales
Sold merchandise under terms
of 2/10, n/60.

1,000
1,000

On January 11, customer paid z-mart the merchandise worth $1000. (Since after 60 days man siya ni bayad, dili
na mo apply ang 2% discount.)
Jan. 11 Cash
Accounts Receivable
1,000
Received payment for Nov. 12 sale.

1,000

On November 22, customer paid z-mart the merchandise worth $1000. (Since nibayad man siya on the 10 th day, ni
apply ang 2% nga discount.)
Nov. 22 Cash
(1000-(1000*2%)
980
Sales Discount (1000*2%)
20
Accounts Receivable
Received payment for Nov. 12
less discount.

1,000

(For Sales Returns)

recall Z-Marts sale of merchandise on November 3 for
$2,400 that had cost $1,600. Assume that the customer returns part of the merchandise on November 6, and the
returned items sell for $800 and cost $600.
Nov. 3 Sales Returns and Allowances 800
Accounts Receivable
Customer returns merchandise
of Nov.3 sale.

800

If the merchandise returned to Z-Mart is not defective and can be resold to another customer,
Z-Mart returns these goods to its inventory.
Nov. 3 Merchandise Inventory
600
Cost of Goods Sold
Returned goods added to
inventory.

600

(For Sales Allowances)

assume that $800 of the merchandise Z-Mart sold on November 3 is defective but the buyer decides to keep it
because Z-Mart offers a $100 price reduction.
Nov. 3 Sales Returns and Allowances

100

Accounts Receivable
To record sales allowance
on Nov. 3 sale.

100