JOURNAL ENTRIES – PERIODIC INVENTORY SYSTEM:

SELLER’S BOOK BUYER'S BOOK

Sales: Purchases:
1. Merchandise sold for cash 1. Merchandise is purchased/acquired for cash

On March 1, Dixie Trading sold merchandise for P500 On March 1, Pearl Enterprise purchased merchandise
cash to Pearl Enterprise. for P500 cash to Dixie Trading.

Cash 500 Purchases 500

Sales 500 Cash 500

2. Merchandise sold on account 2. Merchandise is purchased/acquired on account

On March 3, Dixie Trading sold merchandise to Pearl On March 3, Pearl Enterprise purchased merchandise to
Enterprise for P2,000 on account. Dixie Trading for P2,000 on account.

Accounts Receivable 2,000 Purchases 2,000

Sales 2,000 Accounts Payable 2,000

3. Merchandise sold with down payment on the date 3. Merchandise is purchased with a down payment
of sale and the balance on account. given at the date of purchased and the balance on
account.

On March 11, Dixie Trading sold merchandise to Pearl On March 11, Pearl Enterprise purchased merchandise to
Enterprise for P15,000. A down payment of P5,000 was Dixie Trading for P15,000. A down payment of P5,000 was
received and the balance placed on account. paid and the balance placed on account.

Cash 5,000 Purchases 15,000

Accounts Receivable 10,000 Cash 5,000
Sales 15,000 Accounts Payable 10,000

Sale of merchandise with Trade Discount given: Purchase merchandise with Trade Discount:

Dixie Trading sold to Pearl Enterprise 1,000 boxes of soap.
The catalog or list price was P700 per box, with a 10%
trade discount for orders of 201 to 500 boxes plus an
additional 10% trade discount for orders of 501 to 1,000
boxes.
Pearl Enterprise purchased to Dixie Trading 1,000 boxes of
soap. The catalog or list price was P700 per box, with a
10% trade discount for orders of 201 to 500 boxes plus an
additional 10% trade discount for orders of 501 to 1,000
boxes.

List price (1,000 cases x P700) P 700,000 Purchases 567,000

st
Less: 1 Trade Discount (P700,000 x 10%) 70,000 Cash 567,000
Net amount after 1st Trade Discount P 630,000
Less: 2nd Trade Discount (P630,000 x 10%) 63,000 *the assumption is purchased for cash, if it’s on account
Sales Price P 567,000 the credit account would be Accounts Payable

*other computation (P700,000 x 90% x 90%) = P567,000

Cash 567,000
Sales 567,000
*the assumption is cash sales if it’s on account the debit
account would be Accounts Receivable
Sales Return and Allowances: Purchase Return and Allowances:

1. Dixie Trading accepted the returns of damaged 1. Pearl Enterprise returned damaged merchandised to its
merchandise from a customer. Issued a credit memo for supplier. Received a credit memo from supplier for P500.
P500 to the customer.

Sales Return and Allowances 500 Accounts Payable 500

Accounts Receivable 500 Purchase Returns and Allowances 500

2. A customer refunded P200 cash for return of damaged 2. A cash refund was received for merchandise returned to
merchandise. supplier, P200.

Sales Return and Allowances 200 Cash 200

Cash 200 Purchase Returns and Allowances 200

Sales Discounts: Purchase Discounts:

Transactions: Transactions:
May 01 Sold Merchandise to Pearl Enterprise, P2,000 on May 01 Purchased Merchandise to Dixie Trading, P2,000
terms of 2/10,n/30. on terms of 2/10,n/30.
May 03 Issued a credit memo for damaged merchandise May 03 Received a credit memo for damaged
returned by Pearl Enterprise,P100 merchandise from Dixie Trading, P100
May 11 Received check from Pearl Enterprise in full May 11 Paid check to Dixie Trading in full payment of its
payment of their account. account.

May 1 Accounts Receivable 2,000 May 1 Purchases 2,000

Sales 2,000 Accounts Payable 2,000

May 3 Sales Return and Allowances 100 May 3 Accounts Payable 100
Accounts Receivable 100 Purchase Return and Allowances 100

May 11 Cash 1,862 May 11 Accounts Payable 1,900

Sales Discounts 38 Cash 1,862
Accounts Receivable 1,900 Purchase Discounts 38

*please take note that Sales Discount is based on Net Sales (Sales less
Sales Returns and Allowances in the above example Net Sales is
P1,900).
*in the above example that payment is within the discount period of 10
days. If the payment will be beyond May 11 or 10 days. No discount will
be given and the entry will be debit Cash 1,900 and credit Accounts
Receivable 1,900
Freight out or Delivery Expenses or Transportation-out
*please take note that Sales Discount is based on Net Sales (Sales less
Sales Returns and Allowances in the above example, P1,900)
*in the above example that payment is within the discount period of 10
days. If the payment will be beyond May 11 or 10 days. No discount will
be given and the entry will be debit Accounts Payable 1,900 and credit
Cash 1,900
Freight-in or Delivery-in or Transportation-in

On January 10, Dixie Trading located in Los Banos sold
merchandise worth P100,000 from Pearl Enterprise located
in Batangas with terms 2/10,n/30. Freight or
transportation cost amounted to P10,000 was paid on
January 14 based on below assumptions. On January 20
Pearl Enterprise paid in full.
On January 10, Pearl Enterprise located in Batangas
purchased merchandise worth P100,000 from Dixie Trading
located in Los Banos with terms 2/10,n/30. Freight or
transportation cost amounted to P10,000 was paid on
January 14 based on below assumptions. On January 20
Pearl Enterprise paid in full.

Assume the following shipping terms: Assume the following shipping terms:
 a. FOB shipping point, freight collect a. FOB shipping point, freight collect

Jan 10 Accounts Receivable 100,000 Jan 10 Purchases 100,000

Sales 100,000 Accounts Payable 100,000

Jan 14 No Entry Jan 14 Freight-in 10,000

Cash 10,000
Jan 20 Cash 98,000
Sales Discounts 2,000 Jan 20 Accounts Payable 100,000
Accounts Receivable 100,000 Cash 98,000
Purchase Discounts 2,000
b. FOB shipping point, freight prepaid b. FOB shipping point, freight prepaid

Jan 10 Accounts Receivable 100,000 Jan 10 Purchases 100,000

Sales 100,000 Accounts Payable 100,000

Jan 14 Accounts Receivable 10,000 Jan 14 Freight-in 10,000

Cash 10,000 Accounts Payable 10,000

Jan 20 Cash 108,000 Jan 20 Accounts Payable 110,000

Sales Discounts 2,000 Cash 108,000
Accounts Receivable 110,000 Purchase Discounts 2,000

c. FOB Destination, freight prepaid c. FOB Destination, freight prepaid

Jan 10 Accounts Receivable 100,000 Jan 10 Purchases 100,000

Sales 100,000 Accounts Payable 100,000

Jan 14 Freight-out 10,000 Jan 14 No entry

Cash 10,000

Jan 20 Cash 98,000 Jan 20 Accounts Payable 100,000

Sales Discounts 2,000 Cash 98,000
Accounts Receivable 100,000 Purchase Discounts 2,000

d. FOB Destination, freight collect d. FOB Destination, freight collect

Jan 10 Accounts Receivable 100,000 Jan 10 Purchases 100,000

Sales 100,000 Accounts Payable 100,000

Jan 14 Freight-out 10,000 Jan 14 Accounts Payable 10,000

Accounts Receivable 10,000 Cash 10,000

Jan 20 Cash 88,000 Jan 20 Accounts Payable 90,000

Sales Discounts 2,000 Cash 88,000
Accounts Receivable 90,000 Purchase Discounts 2,000

*Freight-out account is used to record shipping cost
shouldered by the seller for sales of merchandise to
customers. Another term is Delivery Expense or
Transportation-out which is shown on the Selling Expense
section of the Income Statement.
*Freight-in account is used to record freight cost incurred
by the buyer in acquiring merchandise. It is shown in the
Cost of Goods Sold section of the Income Statement. It’s
added to purchases. It is called adjunct account.