MERCHANDISING BUSINESS
One that is engaged in the purchasing and
selling of goods with additional price to
generate income
ACCOUNTS
1. Sales
Wholesalers - Income account
Buy finished products in large quantities - Credited when the goods are sold by cash/on
from the manufacturers and sell them to account
retailers 2. Sale Return & Allowances
Retailers - Return: Physical return of goods due to
Buy goods in smaller quantities/volume damages/ wrong delivery/subquality
Forefront to customers - Allowance: price reduction when the buyer
decides to buy/keep the damaged/subquality
product
Methods on Accounting of 3. Sales Discount
Merchandising Business - Amount deducted from the regular price valid for
A SPECIFIC PERIOD OF TIME
1. Perpetual Inventory
No physical counting of goods to
4. Net Sales
- Represents the amount computed when the total
determine the cost of goods sold and
sales are deducted with Sales Return &
ending inventory
Allowances and Discounts
Keeps track of all changes in the
- Net Sales = Total Sales – (SR&A + SD)
inventory account
More expensive (E.g., more costs are 5. Gross Sales Profit
incurred to make sure the amounts - Represents the amount computed when net
regarding inventory are available at sales is deducted to cost of sales
every point of sale) - Gross Sales = Net Sales – Cost of Sales
2. Periodic Inventory 6. Purchases
Physical counting of merchandise to - Account used to record the purchase of
determine the cost of items sold and merchandise intended for resale
ending inventory 7. Purchase Return & Allowances
Provide data on inventory levels at - Certain deductions from purchases’ price
some point of time - Used to record any considerable
Counting is done usually at year-end to return/allowance due to defectivity
provide figures as to how many exist at 8. Purchase Discount
that point in time - Deduction from the catalog price when the buyer
Cheaper to implement is settled their payable promptly
9. Shipping Charges
Operating Cycle - Amounts of the merchandise delivered
- Two types:
o Free on Board Shipping Point – buyer
shoulders the delivery expense to
delivery venue; Shipping Point –
location of the seller
o F.O.B. Destination – seller shoulders
delivery expense upon the delivery of
merchandise to the buyer’s place
10. Cost of Goods Sold
- Represents the goods sold during a specific
period
- Deducted from sales to determine Gross Sales
Profit
11. Merchandise Inventory
- Goods on hand
- Ready for resale on the next accounting period
One that is engaged in the purchasing and
selling of goods with additional price to
generate income
ACCOUNTS
1. Sales
Wholesalers - Income account
Buy finished products in large quantities - Credited when the goods are sold by cash/on
from the manufacturers and sell them to account
retailers 2. Sale Return & Allowances
Retailers - Return: Physical return of goods due to
Buy goods in smaller quantities/volume damages/ wrong delivery/subquality
Forefront to customers - Allowance: price reduction when the buyer
decides to buy/keep the damaged/subquality
product
Methods on Accounting of 3. Sales Discount
Merchandising Business - Amount deducted from the regular price valid for
A SPECIFIC PERIOD OF TIME
1. Perpetual Inventory
No physical counting of goods to
4. Net Sales
- Represents the amount computed when the total
determine the cost of goods sold and
sales are deducted with Sales Return &
ending inventory
Allowances and Discounts
Keeps track of all changes in the
- Net Sales = Total Sales – (SR&A + SD)
inventory account
More expensive (E.g., more costs are 5. Gross Sales Profit
incurred to make sure the amounts - Represents the amount computed when net
regarding inventory are available at sales is deducted to cost of sales
every point of sale) - Gross Sales = Net Sales – Cost of Sales
2. Periodic Inventory 6. Purchases
Physical counting of merchandise to - Account used to record the purchase of
determine the cost of items sold and merchandise intended for resale
ending inventory 7. Purchase Return & Allowances
Provide data on inventory levels at - Certain deductions from purchases’ price
some point of time - Used to record any considerable
Counting is done usually at year-end to return/allowance due to defectivity
provide figures as to how many exist at 8. Purchase Discount
that point in time - Deduction from the catalog price when the buyer
Cheaper to implement is settled their payable promptly
9. Shipping Charges
Operating Cycle - Amounts of the merchandise delivered
- Two types:
o Free on Board Shipping Point – buyer
shoulders the delivery expense to
delivery venue; Shipping Point –
location of the seller
o F.O.B. Destination – seller shoulders
delivery expense upon the delivery of
merchandise to the buyer’s place
10. Cost of Goods Sold
- Represents the goods sold during a specific
period
- Deducted from sales to determine Gross Sales
Profit
11. Merchandise Inventory
- Goods on hand
- Ready for resale on the next accounting period
