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Chapter 11

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Half Blood
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BCA 001 – Accounting Plus

Chapter 11: Accounting for a


Merchandising Concern
(Special Considerations)
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Please be informed that any unauthorized printing, copying, or any form of


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materials is strictly prohibited under the Philippine Copyright Law.

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Chapter 11: Accounting for a Merchandising Concern (Special Considerations)

Learning Objectives:

▪ LO 1-To compare and contrast the entries needed


for the periodic and perpetual inventory system.
.

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Review
Chapter 10: Accounting for a Merchandising
(Completing the Cycle)
L0 1 To compare and contrast the entries needed for the periodic and perpetual inventory system.

Inventory Systems

This inventory system is primary used by businesses. In a


periodic inventory system no entries are made to the inventory
account as merchandise is bought or sold. At the end of the
period, when the inventory is counted, entries will be made to
the inventory account to establish the proper inventory balance.
L0 1 To compare and contrast the entries needed for the periodic and perpetual inventory system.

Inventory Systems

An alternative inventory system. Under this inventory system,


the inventory account is continuously updated. Perpetually
updating the inventory account requires that at the time of
purchase, merchandise acquisition be recorded as debit to the
inventory account. At the time of sale, the cost of sales is
determined and recorded by a debit to cost of sales account
and a credit to the inventory account.
Purchase Related Transactions
1. On January 1, 2021 ED SARAN Company purchased P60,000 worth of
merchandise on account from EILLIE BILISH Company. Terms: FOB shipping
point 2/10, n/30

Purchases 60,000 Inventory 60,000


Accounts Payable 60,000 Accounts Payable 60,000

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2.On January 3, ED SARAN Company paid P3,000 freight to
transport the merchandise purchased on January 1.

Freight-In 3,000 Inventory 3,000


Cash 3,000 Cash 3,000

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3. On January 4, ED SARAN returned merchandise costing P10,000
related to January 1 purchases.

Accounts Payable 10,000 Accounts Payable 10,000


PRA 10,000 Inventory 10,000

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4. On January 10, ED SARAN paid the merchandise purchased on
January 1.

Accounts Payable 50,000 Accounts Payable 50,000


Purchase Discount 1,000 Inventory 1,000
Cash 49,000 Cash 49,000

Return Discount 10
Sales Related Transactions
On January 12, ED SARAN sold merchandise on account costing
20,000 for P24,000. Terms: 2/10. n/30.

Accounts Receivable 24,000 Account Receivable 24,000


Sales 24,000 Sales 24,000

Cost of Sales 20,000


Inventory 20,000

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On January 13, customer returned merchandise costing 10,000
that had been sold on account for 12,000. (Related to January 12
sales)

SRA 12,000 SRA 12,000


Accounts Receivable 12,000 Accounts Receivable 12,000

Inventory 10,000
Cost of Sales 10,000

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On January 18, Received payment from customer for merchandise
sold on account on January 12, 2021.

Cash 11,760 Cash 11,760


Sales Discount 240 Sales Discount 240
Accounts Receivable 12,000 Accounts Receivable 12,000

Return Sales 13
Discount
Related to Beginning and Ending Inventory
Beginning Inventory 150,000
Ending Inventory based on the physical count P125,000

Key Note: You can use either adjusting entry method or closing entry method.

To remove Beginning Inventory


Income Summary 150,000 No Entry
Inventory, Beg 150,000

To set-up Ending inventory


Inventory, End 125,000 No Entry
Income Summary 125,000

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Final Examination

Coverage: Accounting for Merchandising Operation.

Schedule: Thursday, December 18, 2021

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“
▪ “ If you are working on
something that you care about,
you don’ t have to be pushed.
The vision pulls you.

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Thank you and God bless!
References:

Textbook:
Basic Accounting, Made Easy, Ballada, (2018, 2019, 2020) Sampaloc, Manila

Conceptual Framework and Accounting Standards; Valix, Peralta, Valix (2019)


Websites:
Merchandising Definition (investopedia.com)

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For questions and
concerns
[email protected]

https://www.facebook.com/ascelllow

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