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5 ACCOUNTING FOR
MERCHANDISING
ACTIVITIES
Perpetual Periodic
Inventory Inventory
System System
Let’s look
at some
entries!
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
Close Dividends to
Retained Earnings. © The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Next is the
periodic
inventory
system!
Let’s look
at some
entries!
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
Close Dividends to
Retained Earnings. © The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Comparison of Perpetual and
Periodic Inventory Systems
Perpetual Inventory Periodic Inventory
System System
GENERAL JOURNAL
2/10, n/30
Read as: “Two ten, net thirty”
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2002
Credit Terms and Cash Discounts
2/10, n/30
Percentage # of Days Otherwise, # of Days
of Discount Discount Is the Full when Full
Available Amount Is Amount Is
Due Due
Purchases are
recorded at their
net amounts.
Net Purchase
Method discounts lost
are recorded
when payment
is made outside
the discount
period.
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Credit Terms and Cash Discounts
On July 6, Play Clothes purchased $4,000 of
merchandise on credit with terms of
2/10, n/30 from Kid’s Clothes.
Prepare the journal entry for Play Clothes.
GENERAL JOURNAL
GENERAL JOURNAL
McGraw-Hill/Irwin
$4,000 98% = $3,920 © The McGraw-Hill Companies, Inc., 2002
Credit Terms and Cash Discounts
On July 15, Play Clothes pays the full amount
due to Kid’s Clothes.
Prepare the journal entry for Play Clothes.
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
Purchases are
recorded at their
gross amounts.
Gross Purchase
Method discounts taken
are recorded
when payment
is made inside
the discount
period.
© The McGraw-Hill Companies, Inc., 2002
McGraw-Hill/Irwin
Recording Purchases at Gross
Invoice Price
On July 6, Play Clothes purchased $4,000 of
merchandise on credit with terms of
2/10, n/30 from Kid’s Clothes.
Prepare the journal entry for Play Clothes.
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
McGraw-Hill/Irwin
$500 98% = $490 © The McGraw-Hill Companies, Inc., 2002
Transportation Costs on Purchases
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
GENERAL JOURNAL
Gross
Net Sales Profit
Margins