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Merchandising Overview

The document outlines the operations of a merchandising business, detailing the buying and selling processes, including trade and cash discounts. It also provides an income statement example for ABC Merchandising, illustrating gross sales, net sales, and cost of goods sold. Additionally, it explains inventory accounting methods and the implications of freight terms in sales transactions.

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jhmalubay
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
12 views

Merchandising Overview

The document outlines the operations of a merchandising business, detailing the buying and selling processes, including trade and cash discounts. It also provides an income statement example for ABC Merchandising, illustrating gross sales, net sales, and cost of goods sold. Additionally, it explains inventory accounting methods and the implications of freight terms in sales transactions.

Uploaded by

jhmalubay
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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MERCHANDISING BUSINESS

A merchant buys already-made products and


sells them for a profit.
Operating Cycle
Purchased / Sold goods amounting to P
300,000
Buyer
: Purchases P
300,000
Accounts Payable / Cash
P 300,000

Seller
: Accounts Receivable / Cash P 300,000
Sales
P 300,000
Returned / Accepted damaged goods, P
30,000
Buyer
: Accounts Payable P
30,000
Purchase Returns
P 30,000

Seller
: Sales Returns P
30,000
Accounts Receivable
P 30,000
TRADE DISCOUNT / CASH
DISCOUNT

• Trade discount is a certain percentage a


manufacturer is
willing to reduce its list price for wholesalers
or retailers.
• Cash discount is a deduction from the invoice
price that can be taken only if the invoice is paid
within a specified time.
TRADE DISCOUNT / CASH
DISCOUNT
• ABC Merchandising sold / purchased 10,000 units of
product A for P 60 per unit. Trade discounts: 20,10.
Terms: 2/10, n /30

Buyer
: Purchases P
432,000
Accounts Payable
Seller P 432,000

: Accounts Receivable P 432,000


Sales
P 432,000
TRADE DISCOUNT / CASH
• ABC DISCOUNT
Merchandising sold / purchased 10,000 units of product A for P 60 per
unit. Trade discounts: 20,10. Terms: 2/10, n /30

PAYMENT / COLLECTION:
Buyer
: Accounts Payable
P 432,000
Cash
P 423,360
Seller Purchase Discount
: Cash 8,640
P 423,360
Sales Discount
ABC MERCHANDISING
Income Statement
For the Year-Ended December 31, 2024

Gross Sales 3,200,000


Less: Sales returns and
allowances 150,000

Sales Discount 50,000

3,000,00
Net Sales 0

1,200,00
Less: Cost of Goods Sold 0
Beginning Inventory 120,000

Add: Net cost of purchases* 1,300,000

Goods Available for sale 1,420,000

Less: Ending Inventory 220,000

Cost of Good Sold 1,200,000

*Gross Purchases 1,350,000

Add: Freight in 150,000


Freight Charges
-Transportation cost associated with the delivery of goods

Buyer
ht In
Cash (or any appropriate account title)
cost of goods sold

Seller
ht Out
Cash (or any appropriate account title)
operating expenses
ACCOUNTING FOR INVENTORY

1. Periodic system
2. Perpetual system
PERIODIC PERPETUAL
Purchase of Purchases 500,00 Merchandise Inventory 500,00
merchandise on 0 0
account, P500,000 Accounts 500,00 Accounts Payable 500,00
Payable 0 0

Payment of freight on Freight in 30,000 Merchandise Inventory 30,000


the purchase, P30,000
Cash 30,000 Cash 30,000

Return of Accounts Payable 20,000 Accounts Payable 20,000


merchandise
purchased to supplier, Purchase return 20,000 Merchandise 20,000
P20,000 Inventory
PERIODIC PERPETUAL
Sale of merchandise Accounts receivable 400,00 Accounts receivable 400,00
on account, P400,00 0 0
at gross profit of 40%. Sales 400,00 Sales 400,00
Cost of the 0 0
merchandise sold is
60% or P240,000
Cost of goods sold 240,00
0
Merchandise 240,00
Inventory 0

Return of Sales return 25,000 Sales return 25,000


merchandise sold
from customer, Accounts 25,000 Accounts 25,000
P25,000. the cost of Receivable Receivable
the merchandise
returned is 60% of
Merchandise inventory 15,000
P15,000
Cost of goods sold 15,000
Who owns the goods?
123 Traders sold merchandise totaling P20,000 FOB
destination, freight prepaid; terms 2/10, n /30. The
transportation costs amounted to P2,000.

Accounts Receivable 20,000


Transportation Out 2,000
Sales
20,000
Cash
2,000
123 Traders sold merchandise totaling P20,000 FOB shipping
point, freight collect; terms 2/10, n /30. The transportation
costs amounted to P2,000.

Accounts Receivable 20,000


Sales
20,000
123 Traders sold merchandise totaling P20,000 FOB
destination, freight collect; terms 2/10, n /30. The
transportation costs amounted to P2,000.

Accounts Receivable 18,000


Freight Out 2,000
Sales
20,000
123 Traders sold merchandise totaling P20,000 FOB shipping
point, freight prepaid; terms 2/10, n /30. The transportation
costs amounted to P2,000.

Accounts Receivable 22,000


Sales
20,000
Cash
2,000

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