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    Accounting For A Merchandising Business Week 2

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    kaye
    This document provides an overview of accounting for a merchandising business. It discusses the operating cycle which involves purchasing inventory, selling it for cash or credit, and collecting accounts receivable. It also covers source documents, the steps in a purchase transaction, terms of transactions like credit periods and discounts, inventory systems, and transportation costs. The goal is to explain the key accounting concepts and processes for a business that buys and sells physical goods.

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    © All Rights Reserved
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    Accounting For A Merchandising Business Week 2

    Uploaded by

    kaye
    35 views31 pages
    This document provides an overview of accounting for a merchandising business. It discusses the operating cycle which involves purchasing inventory, selling it for cash or credit, and collecting accounts receivable. It also covers source documents, the steps in a purchase transaction, terms of transactions like credit periods and discounts, inventory systems, and transportation costs. The goal is to explain the key accounting concepts and processes for a business that buys and sells physical goods.

    Original Title

    (2)Accounting for a Merchandising Business Week 2

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    This document provides an overview of accounting for a merchandising business. It discusses the operating cycle which involves purchasing inventory, selling it for cash or credit, and collecting accounts receivable. It also covers source documents, the steps in a purchase transaction, terms of transactions like credit periods and discounts, inventory systems, and transportation costs. The goal is to explain the key accounting concepts and processes for a business that buys and sells physical goods.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    35 views31 pages

    Accounting For A Merchandising Business Week 2

    Uploaded by

    kaye
    This document provides an overview of accounting for a merchandising business. It discusses the operating cycle which involves purchasing inventory, selling it for cash or credit, and collecting accounts receivable. It also covers source documents, the steps in a purchase transaction, terms of transactions like credit periods and discounts, inventory systems, and transportation costs. The goal is to explain the key accounting concepts and processes for a business that buys and sells physical goods.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 31

    Accounting for a

    Merchandising Business-
    Week 2
    Prepared by:

    RICHPHER G. GAGALAC
    Sub topics
    *Accounting for a Merchandising Business
    • - Operating Cycle of a Merchandising Business
    • - Source Documents
    • - Steps in a Purchase Transactions
    • - Terms of transactions
    • - Inventory System
    Comparison of Income Statements

    Service Merchandising

    Service Revenues P XXX Net Sales P XXX


    (Expenses) (XXX) (Cost of Sales) (XXX)
    Profit P XXX Gross Profit P XXX
    Income XXX
    (Expenses) (XXX)
    Profit P XXX
    Operating Cycle of a Merchandising Business
    CASH SALES

    purchases
    Cash Sales

    CASH

    INVENTORY
    Operating Cycle of a Merchandising Business
    CREDIT SALES
    ns
    tio
    lec
    Co l CASH

    pu
    rch
    ase
    Accounts

    s
    Receivable
    Sal INVENTORY
    e so
    na
    cco
    un
    t
    Source Documents
    • 1. Sales Invoice
    • 2. Bill of Lading
    • 3. Official Receipt
    • 4. Deposit Slip
    • 5. Check
    • 6. Purchase requisition
    • 7. Purchase order
    • 8. Receiving Report
    • 9. Credit Memo
    Sales
    Invoice

    is prepared by
    seller of goods
    and sent to the
    buyer.
    Bill of lading
    is a document
    issued by the
    carrier that
    specifies
    contractual
    conditions and
    terms of delivery.
    Official
    receipt
    evidences the
    receipt of cash
    by the seller or
    the authorized
    representative.
    Deposit Slip
    are printed forms with depositpr’s name, account number
    and space for details of the deposit.
    CHECK
    a written order to a bank by a depositor to pay the amount
    specified in the check.
    Purchase
    Requisition
    a written request to
    the purchaser of an
    entity from an
    employee or user
    department of the
    same entity that goods
    be purchased
    Purchase order
    an authorization made
    by the buyer to the
    seller to deliver the
    merchandise as
    detailed in the form.
    Receiving Report
    a document containing information about goods
    received from a vendor.
    Credit
    memorandum
    a form used by the seller to
    notify the buyer that his
    account is being decreased
    due to errors or other factors
    requiring adjustments.
    Steps in Purchase Transactions

    1. Purchase requisition
    2. Purchase Order
    3. Invoice (Sales / Purchase )
    4. Receiving Report
    5. before payment to check 1 to 4
    Terms of Transactions
    • Credit Period - Sold on account, a period of time is allowed
    for payment
    • Credit terms - n30, 2/10, n/10 eom
    • Cash Discounts - 2/10 (2% discount within 10 days. 10
    days - discount period)
    • Cash Discounts are called Purchase or Sales discount
    Trade discounts – encourage the buyers to purchase
    products because of markdowns from the list price.
    Transportation Costs
    • F.O.B. is an abbreviation for “free on board”.

    • FOB Shipping point, the buyer shoulders the shipping costs:


    ownership over the goods passes from seller to the buyer when the
    inventory leaves the seller’s place of business – the shipping point.
    The buyer already owns the goods while still in transit and
    therefore, shoulders the transportation costs.
    Transportation Costs
    • F.O.B. is an abbreviation for “free on board”.

    • FOB destination, the seller bears the shipping costs. Title


    passes only when the goods are received by the buyer at the
    point of destination; while in transit, the seller is still the
    owner of the goods so the seller shoulders the
    transportation costs.
    Transportation Costs
    • In freight prepaid, the seller pays the transportation costs
    before shipping the goods sold; while in freight collect, the
    freight entity collects from the buyer. Payment by either
    party will not dictate who should ultimately shoulder the
    costs.
    Who shoulders the
    Who Pays the
    Freigth Terms transportation
    Shipper?
    Costs
    FOB Destination, Freight Prepaid Seller Seller
    FOB Shipping Point, Freight Collect Buyer Buyer
    FOB Destination, Freight Collect Seller Buyer
    FOB Shipping Point, Freight Prepaid Buyer Seller
    • The Shipping costs borne by the buyer using the
    periodic inventory system are debited to
    transportation in account. In the cost of sales
    section of the income statement, the balance in this
    account is added to purchases in computing for the
    net cost of purchases for the period.

    • Shipping cost borne by the seller are debited to


    transportation out account. This account which
    also called delivery expense or freight out, is an
    operating expense in the income statement.
    Inventory System
    • Perpetual inventory system
    • Periodic Inventory system
    Perpetual Inventory System
    • The inventory account is continuously updated.

    Purchases
    Recorded
    Purchase discounts
    as Merchandise
    Purchase returns and Inventory
    allowances

    Transportation In
    Periodic Inventory System
    • When goods are purchased, a separate set of accounts is used to
    accumulate information on the net cost of the purchases
    • Only at the end of the period, when inventory is counted, will entries be
    made to the inventory account to establish its proper balance.

    Purchases PHP 122,030.00


    Purchase return and allowances (1,750.00)
    Purchase discount (2,300.00)
    Freight In 1,200.00
    Net Cost of Purchases PHP 119,180.00
    Any Questions???
    - END -

    •Thank you
    •and
    •God bless
    References
    • Ballada – Basic Accounting and Reporting – 24th Edition
    • https://www.vertex42.com/ExcelTemplates/sales-invoice-template.html
    • https://www.investopedia.com/terms/b/billoflading.asp
    • https://cloudcfo.ph/blog/corporate/how-to-fill-out-an-official-receipt-an
    d-sales-invoice
    • https://www.affordablecebu.com/download-bdo-cash-transaction-slip
    • https://primer.com.ph/tips-guides/2018/05/23/tips-on-writing-a-bank-c
    heck-in-the-philippines/
    • http://rves.depedpasay.ph/purchase-request/
    • https://www.gonitro.com/pdf-templates/purchase-order-template
    • https://necs.com/knowledgebase/recpo_recvrpt.htm
    • https://tallysolutions.com/accounting/credit-memo-definition-format-
    scenarios-and-example/#gref

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