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Accounting for

Merchandising Business
Cymon P. Argawanon, CPA
Sample Transactions with discounts

Transaction BUYER’S Book SELLER’S Books


1. Bought merchandise worth Purchases 20,000 Cash 20,000
P20,000.00, Term: COD Cash 20,000 Sales 20,000
2. Purchase of Merchandise, P20,000, Purchases 20,000 Accounts Receivable 20,000
Term n/30 Accounts Payable 20,000 Sales 20,000
3. Collection of account from Accounts Payable 20,000 Cash 20,000
transaction no. 2 Cash 20,000 Accounts Receivable 20,000
4. Bought merchandise worth Purchases 20,000 Accounts Receivable 20,000
P20,0000. Terms 2/10,n/30 Accounts Payable 20,000 Sales 20,000
5. Collection of account within Accounts Payable 20,000 Cash 19,600
discount period Purchase discount 400 Sales discount 400
Accounts Receivable 20,000
Cash 19,600
6. Collection of account beyond Accounts Payable 20,000 Cash 20,000
discount period Cash 20,000 Accounts Receivable 20,000
Sample Transaction with Returns

Transaction BUYER’S Book SELLER’S Books


7. Bought merchandise worth Purchases 20,000 Accounts Receivable 20,000
P20,0000. Terms n/30 Accounts Payable 20,000 Sales 20,000
8. Customer returned goods costing Accounts Payable 5,000 Sales Return 5,000
P5000 for being defective. Purchase Return 5,000 Accounts Receivable 5,000
9. Payment of the Balance Accounts Payable 15,000 Cash 15,000
Cash 15,000 Accounts Receivable 15,000
Sample Transaction with Down payment

Transaction BUYER’S Book SELLER’S Books


7. Bought merchandise worth Purchases 20,000 Accounts Receivable 10,000
P20,0000. Terms 50% downpayment Cash 10,000 Cash 10,000
and balance n/30 Accounts Payable 10,000 Sales 20,000
9. Payment of the Balance Accounts Payable 10,000 Cash 10,000
Cash 10,000 Accounts Receivable 10,000
Guide for transactions with
Transportation Costs

Sellers Books Buyer’s Books

FOB Shipping Point; Freight Accounts Receivable XX Freight – In XX


Prepaid Cash XX Accounts Payable XX

FOB Shipping point; Freight No Entry Freight – In XX


Collect Cash XX

FOB Destination Point; Freight Freight Out XX No Entry


Prepaid Cash XX

FOB Destination Point; Freight Freight Out XX Accounts Receivable XX


Collect Accounts Payable XX Cash XX
Sample Case: Provide for the Journal
Entries

▪ Nov. 1 - Hi-tech purchased merchandise for 2,800 on credit


terms 2/5, n/30, FOB Shipping point and paid for the
transportation cost amounting to 160
▪ Nov. 3 - Hi tech discovers and returns 200 defective merchandise
purchased on Nov. 1
▪ Nov. 5 - Hi tech pays cash for Nov. 1 purchase.
▪ Nov. 10 - Hi tech sells merchandise for P3000 on credit
▪ Nov. 16 - The customer returns merchandise from the Nov. 10
transaction with a selling price of P400
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