ACCOUNTING CYCLE

FOR MERCHANDISING
CONCERN
(PERPETUAL METHOD)
I. Use the following CHART OF ACCOUNTS for
Journalizing, Posting, Trial Balance, Closing
Entries, and Post Closing Trial Balance.
CODE ACCOUNT TITLE CODE ACCOUNT TITLE
10 Cash 61 Sales Discount
11 Accounts Receivable 62 Sales Returns and Allowances
12 Notes Receivable 70 Cost of Goods Sold
13 Merchandise Inventory 71 Purchases
20 Office Equipment 72 Freight In
21 Furnitures and Fixtures 73 Purchase Discount
30 Accounts Payable 74 Purchase Returns and Allowances
50 Buhay, Capital 75 Freight Out
51 Buhay, Personal 76 Salaries Expense
52 Income Summary 77 Utilities Expense
60 Sales 78 Advertising Expense
 II. Use the following CHART OF ACCOUNTS for
Financial Statement Preparation.
CODE ACCOUNTS TITLE CODE ACCOUNTS TITLE

10 Cash 62 Sales Returns and Allowances

11 Accounts Receivable 70 Cost of Goods Sold

12 Notes Receivable 71 Purchases

13 Merchandise Inventory 72 Freight In

20 Property, Plant and Equipment 73 Purchase Discounts

30 Accounts Payable 74 Purchase Returns and Allowances

50 Buhay, Capital 75 Freight Out

51 Buhay, Personal 76 Salaries

52 Income Summary 77 Utilities

60 Sales 78 Advertising

61 Sales Discount
 MR. BUHAY operates a business named “ALIVE GENERAL
MERCHANDISE” He provided you with the following transactions for the
month of October 2018:
DATE TRANSACTION

OCTOBER 1 Mr. Buhay made an initial investment in the company for P 1,448,500.00 in cash.

3 Purchased goods worth P 250,000.00 on account terms 2/10, n/30 from NABUBUHAY.

5 Sold the goods he bought on OCTOBER 3 at P 475,000.00 in cash to MABUHAY. Cost: P 230,000.00.

8 MABUHAY found out that P 95,000.00 worth of goods bought from BUHAY were defective. Cost of
which is P 50,000.00.
9 Mr. Buhay paid its account on October 3.

12 Purchased goods from NABUHAY P 335,000.00, terms 3/5, 2/8, 1/12. n/30 and later sold to
NAMUMUHAY at P 670,000.00 on account, terms 2/10, n/30.
 DATE TRANSACTIONS
15 Paid the following Expenses: Salaries: Ᵽ65,000.00, Advertising: Ᵽ45,000.00, and Freight: Ᵽ37,500.00.

16 NAMUMUHAY paid 40 percent of its account.

21 Purchased goods worth Ᵽ430,000.00 in cash from LIVING and paid Freight worth Ᵽ5,500.00.
23 Mr. Buhay returned Ᵽ85,400.00worth damage goods to LIVING.
24 Mr. Buhay has taken cash from the business worth Ᵽ200,000.00.
26 Paid Utilities worth Ᵽ45,000.00.
28 Purchased Office Equipment worth Ᵽ340,000.00 and Tables and Chairs worth Ᵽ225,400.00 in cash.
31 Purchased goods worth Ᵽ75,800.00 in cash and later sold to customer at Ᵽ150,000.00.
REQUIRED:
1. Journalize the foregoing transactions.
2. Post the transactions/ Journal Entries to the Ledger.
3. Prepare the following:
a. Trial balance
b. Income Statement
c. Statement of Changes in Owner’s Equity
d. Statement of Financial Position
e. Statement of Cash Flow
f. Closing Entries
g. Post-Closing Trial Balance
I. JOURNALIZATION:
PAGE: GJ-1
DATE PARTICULARS F DEBIT CREDIT
October 1 Cash 10 Ᵽ1,448,500.00
Buhay, Capital 50 Ᵽ1,448,500.00
To record the initial
investment mad by Mr. Buhay.

3 Merchandise Inventory 13 250,000.00

Accounts Payable 30 250,000.00
To record purchased goods on
account.

5 Cash 10 475,000.00

Sales 60 475,000.00
To record sold goods in cash.
 PAGE:
October 5 Cost of Goods Sold 70 Ᵽ230,000.00
GJ-1
Merchandise Inventory 13 Ᵽ230,000.00
To record Cost of Goods
Sold.

8 Sales Return and Allowances 70 95,000.00

Cash 13 95,000.00
To record returned
goods by MABUHAY.

9 Accounts Payable 30 250,000.00

Cash 10 245,000.00
Merchandise Inventory 13 5,000.00

To record payments of
Accounts Payable.
October 12 Merchandise inventory 13 Ᵽ335,000.00

Accounts Payable 30 Ᵽ335,000.00

To record purchased
goods.
PAGE: GJ-2
12 Accounts Receivable 11 670,000.00

Sales 60 670,000.00

To record sold goods on

account.

12 Cost of Goods Sold 70 335,000.00

Merchandise Inventory 30 335,000.00

To record Cost of Goods

Sold.
 PAGE: GJ-2
October 15 Freight Out 75 Ᵽ37,500.00

Salaries Expense 76 65,000.00

Advertising Expense 78 45,500.00

Cash 10 Ᵽ148,000.00

To record payments of
various expenses.

16 Cash 10 262,640.00

Sales Discount 61 5,360.00

Accounts Receivable 11 268,000.00

To record collection
from costumers.
 PAGE: GJ-2
October 21 Merchandise Inventory 13 Ᵽ435,500.00
Cash 10 Ᵽ435,500.00
To record purchased
goods and payment of freight.

23 Cash 10 85,400.00
Merchandise Inventory 14 85,400.00
To record returned
goods to Living.
PAGE: GJ-3
24 Buhay, Personal 51 200,000.00
Cash 10 200,000.00
To record cash
withdrawal made by Mr.
Buhay.
 PAGE:
October 26 Utilities Expense 77 Ᵽ45,000.00
GJ-3
Cash 10 Ᵽ45,000.00

To record payment of Utilities.

28 Office Equipment 20 340,500.00

Furnitures and Fixtures 21 225,400.00

Cash 10 565,900.00

To record purchased of
Furnitures and Office
Equipment.

31 Merchandise Inventory 13 75,800.00

Cash 10 75,800.00

To record purchased goods.

 PAGE: GJ-
October 31 Cash 10 Ᵽ150,000.00

Sales 60 Ᵽ150,000.00

To record sold goods in cash.

31 Cost of goods sold 70 75,800.00

Merchandise Inventory 13 75,800.00

To record cost of goods sold.

2.POSTING
CASH
GENERALACCOUNT
LEDGERNO. 10
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 1 Investment made by Mr. Buhay. GJ-1 Ᵽ1,448,500.00 Ᵽ1,448,500.00
5 Sold goods in cash. GJ-1 475,000.00 1,923,500.00
8 Returned goods by Mr. Mabuhay GJ-1 Ᵽ95,000.00 1,828,500.00
9 Payment of Accounts Payable. GJ-2 245,000.00 1,583,500.00
15 Payment of various expenses. GJ-2 148,000.00 1,435,500.00
16 Collections from customers. GJ-2 262,640.00 1,698,140.00
21 Purchased goods and payments of GJ-2 435,500.00 1,262,640.00
freight.
23 Returned goods to Living. GJ-3 85,400.00 1,348,040.00
24 Withdrawal by Mr. BUHAY GJ-3 200,000.00 1,148,040.00
26 Payment of Utilities. GJ-3 45,000.00 1,103,040.00
28 Purchased of Furniture & Office Equipment. GJ-3 565,900.00 537,140.00
31 Purchased goods GJ-3 75,800.00 461,340.00
31 Sold goods in cash. GJ-3 150,000.00 Ᵽ611,340.00
ACCOUNTS RECEIVABLE ACCOUNT NO. 11
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 12 Sold goods on Account GJ- Ᵽ670,000.00 670,000.00
1
16 Collection from Customers GJ- Ᵽ268,000.00 Ᵽ402,000.00
3
MERCHANDISE INVENTORY ACCOUNT NO.13
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 3 Purchased Goods GJ-1 250,000.00 250,000.00

5 Cost of goods sold GJ-1 230,000.00 20,000.00

9 Purchased Discount GJ-2 5,000.00 15,000.00

12 Purchased Goods GJ-2 335,000.00 350,000.00

12 Cost of Goods Sold GJ-2 335,000.00 15,000.00

21 Purchased Goods and GJ-3 435,500.00 450,500.00

paid Freight
23 Returned Goods to Living GJ-3 85,400.00 365,100.00

31 Purchased Goods GJ-4 75,800.00 440,000.00

31 Cost of Goods Sold GJ-4 75,800.00 Ᵽ365,100.00

OFFICE EQUIPMENT ACCOUNT NO. 20

DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT

(BALANCE) (BALANCE)
October 28 Purchased Equipment GJ-3 340,000.00 Ᵽ340,000.00

FURNITURES AND FIXTURES

DATE
ACCOUNT
PARTICULARS
NO. 21
F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 28 Purchased Furnitures GJ-3 225,400.00 Ᵽ225,400.00
ACCOUNTS PAYABLE
ACCOUNT NO. 30
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 3 Purchased goods. GJ- 250,000.00 250,000.00
1
9 Paid its Account Payable GJ- 250,000.00 -0-
2
12 Purchased Goods GJ- 335,000.00 Ᵽ335,000.00
2

BUHAY,CAPITAL
ACCOUNT NO. 50
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 1 Investment made by Mr. GJ- 1,448,500.00 Ᵽ1,448,500.00
Buhay. 1
INCOME SUMMARY ACCOUNT NO.52
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October GJ-

GJ-

SALES
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
ACCOUNT NO. 60 (BALANCE) (BALANCE)
October 5 Cash Sales GJ-1 475,000.00 475,000.00

12 Account Sales GJ-2 670,000.00 1,145,000.00

31 Cash Sales GJ-3 150,000.00 1,295,000.00
31 Cash Sales GJ-4 1,295,000.00 Ᵽ0.00
SALES DISCOUNT
ACCOUNT
DATE NO. 61
PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 16 Sales Discount GJ-3 5,360.00 5,360.00
31 Sales Discount GJ-4 5,360.00 Ᵽ0.00

SALES RETURNS AND ALLOWANCES ACCOUNT NO. 62

DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 8 Returned Goods GJ-1 95,000.00 95,000.00
31 Returned Goods GJ-4 95,000.00 Ᵽ0.00

COST OF GOODS SOLD

DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
ACCOUNT NO. 70 (BALANCE) (BALANCE)
October 5 Cost of Goods Sold GJ-1 230,000.00 230,000.00
12 Cost of Goods Sold GJ-2 335,000.00 565,000.00
31 Cost of Goods Sold GJ-3 75,800.00 640,800.00
31 Cost of Goods Sold GJ-4 640,800.00 Ᵽ0.00
FREIGHT OUT
DATEACCOUNT NO. 75
PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 15 Paid Freight GJ-2 37,500.00 37,500.00
31 Paid Freight GJ-4 37,000.00 Ᵽ0.00

SALARIES EXPENSE ACCOUNT NO.76

DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 15 Paid Salaries GJ-2 65,000.00 65,000.00
31 Paid Salaries GJ-4 65,000.00 Ᵽ0.00
UTILITIES EXPENSE ACCOUNT NO. 77
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
(BALANCE) (BALANCE)
October 26 Paid Utilities GJ-3 45,000.00 45,000.00
31 Paid Utilities GJ-4 45,000.00 Ᵽ0.00

ADVERTISING EXPENSE
DATE PARTICULARS F DEBIT CREDIT DEBIT CREDIT
ACCOUNT NO.78 (BALANCE) (BALANCE)
October 15 Paid Advertising GJ-2 45,500.00 45,500.00
31 Paid Advertising GJ-4 45,500.00 Ᵽ0.00
3. TRIAL BALANCE: ALIVE GENERAL MERCHANDISE
TRIAL BALANCE
OCTOBER 31,2018

Account No. Account Title Debit Credit

10 Cash Ᵽ611,340.00

11 Account Receivable 402,000.00

12 Merchandise Inventory 365,100.00

20 Office Equipment 340,500.00

21 Furnitures and Fixtures 225,400.00

30 Account Payable Ᵽ335,000.00

50 Buhay, Capital 1,448,500.00

51 Buhay, Personal 200,000.00

60 Sales 1,295,000.00
61 Sales Discount 5,360.00
62 Sales Returns and Allowances 95,000.00
70 Cost of Goods Sold 640,800.00
75 Freight Out 37,500.00
76 Salaries Expense 65,000.00
77 Utilities Expense 45,000.00
78 Advertising Expense 45,500.00
TOTAL: Ᵽ3,078,500.00 Ᵽ3,078,500.00
FINANCIAL STATEMENT:
ALIVE GENERAL MERCHANDISE
INCOME STATEMENT
FOR THE MONTH ENDED OCTOBER 31, 2018
Sales Ᵽ1,295,000.00
Sales Discount (5,360.00)
Sales Returns and Allowances (95,000.00) 100,360.00
Net Sales 1,194,640.00
Cost of Goods Sold (640,800.00)
Gross Profit 553,840.00
Operating Expenses:
Freight Out (37,500.00)
Salaries (65,000.00)
Utilities (45,000.00)
Advertising (45,500.00) (193,000.00)
NET INCOME Ᵽ360,840.00
 ALIVEGENERAL MERCHANDISE
STATEMENT OF CHANGES IN OWNER’S EQUITY
AS OF OCTOBER 31,2018
Buhay, Capital Beginning Ᵽ1,448,500.00
Net Income 360,840.00
Total 1,809,340.00
Buhay, PERSONAL (200,000.00)
Buhay, Capital Ending, October 31, 2018 Ᵽ1,609,340.00
 ALIVE GENERAL MERCHANDISE
STATEMENT OF FINANCIAL POSITION
AS OF OCTOBER 31, 2018
ASSETS
CURRENT ASSETS
Cash Ᵽ611,340.00
Accounts Receivable 402,000.00
Merchandise Inventory 365,100.00
Total Current Assets 1,378,440.00
NON-CURRENT ASSETS
Property, Plant and Equipment 565,900.00
TOTAL ASSETS Ᵽ1,944,340.00
LIABILITIES AND OWNER’S
EQUITY
CURRENT LIABILITIES
Account Payable Ᵽ335,000.00
OWNER’S EQUITY
Buhay, Capital 1,609,340.00
TOTAL LIABILITIES AND OWNER’S EQUITY Ᵽ1,944,340.00
 ALIVE GENERAL MERCHANDISE
STATEMENT OF CASH FLOWS
AS OF ACTOBER 31, 2018
CASH FLOW FROM OPERATING ACTIVITIES

Cash received from Sales Ᵽ625,000.00

Cash collected from Customers 262,640.00

Cash refund from Purchase Return 85,400.00

Cash refund from Sales Return (95,000.00)

Cash payment of Accounts Payable (245,000.00)

Cash payment of Expenses (193,000.00)

Cash purchase of Goods (505,800.00)

Cash payment of Freight (5,500.00)

Net Cash Inflows of Operating Activities (Ᵽ71,260.00)

Cash Flows from Investing Activities

Cash of Purchased Equipment and (565,900.00)

Furnitures and Fixtures
Cash Flows from Financing Activities

Investment 1,448,500.00

Withdrawal (200,000.00)

Net Cash Inflows from Financing 1,248,500.00

Activities
Beginning Cash 0

CASH BALANCE, OCTOBER 31,2018 Ᵽ611,340.00

CLOSING ENTRIES
2018 PARTICULARS F DEBIT CREDIT

October 31 Sales 60 Ᵽ1,295,000.00

Income Summary 52 Ᵽ1,295,000.00

To close nominal
accounts with credit
balances.

31 Income Summary 52 934,160.00

Sales Discount 61 934,160.00

Sales Returns & Allowances 62 95,000.00

Cost of Goods Sold 70 640,000.00
Freight Out 75 37,500.00
Salaries 76 65,000.00
Advertising 78 45,000.00
Utilities 77
To close nominal
accounts with debit balances.
October 31 Income Summary 52 360,840.00

Buhay, Capital 50 360,840.00

To close Income
Summary

31 Buhay, Capital 50 200,000.00

Buhay, Personal 51 200,000.00

To close drawings by
the owner.
POST-CLOSING TRIAL BALANCE:
ALIVE GENERAL MERCHANDISE
POST-CLOSING TRIAL BALANCE
AS OF OCTOBER 31, 2018
Account No. Account Titles DEBIT CREDIT

10 Cash Ᵽ611,340.00

11 Account Receivable 402,000.00

12 Merchandise Inventory 365,100.00

20 Office Equipment 340,000.00

21 Furniture and Fixtures 225,400.00

30 Accounts Payable Ᵽ335,000.00

50 Buhay, Capital 1,609,540.00

Ᵽ1, 944,340.00 Ᵽ1,944,340.00