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Accounting For Merchandising

The document discusses the accounting cycle for a merchandising business. It outlines the normal debit and credit balances for different types of accounts like assets, liabilities, revenues, and expenses. It provides examples of specific accounts that fall under each type. The document also includes sample pro forma journal entries for typical merchandising transactions like purchases and sales of inventory on cash and credit terms, returns, payments, and adjustments. Finally, it provides a sample timeline of transactions throughout an accounting period for a merchandising business.

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Evelyn Maligaya
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307 views2 pages

Accounting For Merchandising

The document discusses the accounting cycle for a merchandising business. It outlines the normal debit and credit balances for different types of accounts like assets, liabilities, revenues, and expenses. It provides examples of specific accounts that fall under each type. The document also includes sample pro forma journal entries for typical merchandising transactions like purchases and sales of inventory on cash and credit terms, returns, payments, and adjustments. Finally, it provides a sample timeline of transactions throughout an accounting period for a merchandising business.

Uploaded by

Evelyn Maligaya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ACCOUNTING CYCLE FOR MERCHANDISING

Types of Accounts with normal debit and credit balances

Normal Debit Balance Normal Credit Balance


 Assets  Contra-assets
 Contra-liabilities  Liabilities
 Owner’s drawing  Owner’s capital
 Contra-revenues  Revenues
 Costs and expenses  Contra-cost

Types of accounts Examples


Assets Cash; Accounts Receivable; Merchandise Inventory; Prepaid Expenses; Store Supplies; Office
Supplies; Store Equipment
Contra-assets Allowance for Doubtful Accounts; Accumulated Depreciation – Store Equipment
Liabilities Accounts Payable; Unearned Sales Revenue
Revenues Sales Revenue
Contra-revenue Sales Returns and Allowances; Sales Discount
Costs and Expenses Purchases; Freight-in; Freight Out, Salaries Expense
Contra-Cost Purchase Returns and allowances; Purchase Discount

PROFORMA JOURNAL ENTRIES

Transactions Debit Credit


Purchase of merchandise on cash Purchases Cash
basis
Purchase of merchandise on account Purchases Accounts Payable
Purchase of merchandise with down Purchases Cash
payment Accounts Payable
Purchase returns and allowances Cash Purchase Returns and Allowances
(cash basis)
Purchase returns and allowances (on Accounts Payable Purchase Returns and Allowances
account)
Purchase returns and allowances Accounts Payable Purchase Returns and Allowances
(with down payment)
Partial payment of account with Accounts Payable Cash
suppliers
Full payment of account beyond Accounts Payable Cash
discount period
Full payment of account within Accounts Payable Cash
discount period Purchase Discount

Sale of merchandise on cash basis Cash Sales


Sale of merchandise on account Accounts Receivable Sales
Sale of merchandise with down Cash Sales
payment Accounts Receivable
Sales returns and allowances (cash Sales Returns and Allowances Cash
basis)
Sales returns and allowances (on Sales Returns and Allowances Accounts Receivable
account)
Transactions Debit Credit
Sales returns and allowances (with Sales Returns and Allowances Accounts Receivable
down payment)
Partial collection of customer account Cash Accounts Receivable
Full collection of account beyond Cash Accounts Receivable
discount period
Full collection of account within Cash Accounts Receivable
discount period Sales Discount
Payment of freight on merchandise Freight-in Cash
purchased
Payment of freight on merchandise Freight out Cash
sold
Initial investment of merchandise by Merchandise Inventory Owner’s, Capital
owner
Initial investment of merchandise with Merchandise Inventory Accounts Payable
liability Owners, Capital
Additional investment of merchandise Purchases Owners, Capital
by owner
Withdrawal of merchandise by owner Owner, Drawing Purchases

Date Transaction
June 11 Purchased from A merchandise on cash basis, P 10,000
11 Paid freight on merchandise purchased from A, P 800
12 Purchased from B merchandise worth P 15,000 on terms 2/10, n/30
13 Purchased from C merchandise worth P 20,000 on terms 50% down, balance 2/10, n/30
14 Returned P 500 worth of merchandise purchased from A
15 Returned P 1000 worth of merchandise purchased from B
16 Returned P 1500 worth of merchandise purchased from C
17 Paid P 2000 in partial payment of account with C
22 Paid in full account with B
30 Paid in full account with C

Date Transaction
June 15 Sold to D merchandise on cash basis, P 10000
Paid freight on merchandise sold to D, P 800.
16 Sold to E merchandise worth P 15,000 on terms 2/10, n/30
17 Sold to F merchandise worth P 20,000 on terms 50% down, balance 2/10, n/30
18 Received the return of 500 worth of merchandise sold to D
19 Received the return of P 1000 worth of merchandise sold to E
20 Received the return of P 1,500 worth of merchandise sold to F
21 Collected P 2,000 from F for partial payment of account
26 Collected in full the account with E
30 Collected in full the account with F.

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