L9: Merchandising Accounting Cycle:

Periodic

SUBJECT- DESCRIPTIVE TITLE

SUBJECT - CODE

PREPARED BY:
[INSTRUCTOR’S NAME]

Module No. 1 SCHOOL NAME

 LEARNING OBJECTIVES

⚫ Accounting Process using the Periodic inventory

method

Module No. 1 Title of Your Presentation

 Recording of the Initial journal entries in the General Journal

Periodic inventory method Perpetual inventory method

Buying:
Buying:
Merchandise inventories
Purchases
Purchase returns and allowances Selling:
Purchase discounts
Freight-in
Sales
Sales returns and allowances
Selling:
Sales discounts

Sales
Sales returns and allowances Cost of goods sold
Sales discounts Merchandise inventories

Freight-out Freight-out
Adjustments:
Adjustments:
None
Merchandise inventories
 Sample Chart of Accounts - Merchandising
F EXPENSES (100 -150)
F CURRENT ASSETS (1-29)
100 Cost of goods sold
1 Cash
F CURRENT LIABILITIES (49-59) 101 Purchases
2 Notes receivable
49 Accounts payable 102 Purchase returns and allowances
3 Interest receivable
50 Unearned sales revenue 103 Purchase discounts
4 Accounts receivable
51 Salaries payable 104 Freight-in
5 Allowance for Doubtful Accounts 105 Salaries expense
52 Rent payable
6 Merchandise Inventories 106 Utilities expense
7 Supplies F NONCURRENT LIABILITIES (60-69) 107 Transportation expense

8 Prepaid rent 60 Notes payable 108 Communication expense

9 Prepaid insurance 61 Loans payable 109 Permits and licenses

10 Prepaid advertising 62 Mortgage payable 110 Professional fees

63 Interest payable 111 Taxes

112 Food allowances
F NONCURRENT ASSETS (30-49)
113 Commissions and bonuses
30 Land F PROPRIETORSHIP/ CAPITAL (70-79)
114 Claims and damages
31 Building 70 Penduko, Capital
115 Freight-out
32 Accumulated depreciation - Bldg. 71 Penduko, Drawings
116 Repairs and maintenance
33 Equipment 117 Security expense
34 Accumulated depreciation - Equipment F INCOME (80-99) 118 Rent expense
35 Machineries 80 Sales Revenue - A 119 Supplies expense
36 Accumulated depreciation - Machinery 81 Sales Revenue - B 120 Advertising expense

37 Service Vehicle 82 Sales Revenue - C 121 Insurance expense

38 Accumulated depreciation - Service Vehicle 83 Sales Revenue - D 122 Interest expense

123 Doubtful accounts
39 Furniture and Fixtures 84 Sales Revenue - E
124 Depreciation expense
40 Accumulated depreciation - Furniture & Fixtures 85 Sales returns and allowances
125 Loss on sale of asset
41 Goodwill 86 Sales discounts
126 Miscellaneous expense
42 Copyright 87 Interest Income  
43 Trademark 88 Gain on sale of asset F Summary account
Module No. 1
44 Patent 89 Other Income Title of Your Presentation
200 Income and expense summary
 Illustration: Super White Rice Retail

Super White Rice Retail, owned by Mr. Pedro Penduko, has the following beginning balances for the
month of January, 2020:

Debit Credit
Cash P100,000
Merchandise inventory 60,000
Prepaid rent 15,000
Equipment 77,600
Accumulated depreciation P8,400
Accounts payable 40,000
Penduko, Capital 204,200
Balance P252,600 P252,600

Based on previous month’s financial records, Super White Rice Retail has an average gross profit rate of
40% based on sales.

The following transactions occurred for the month of January:

Jan. 1 Mr. Pedro Penduko invested additional cash in the business, P50,000.
3 Purchased merchandise inventory for cash from Angel Rice Wholesaler P55,000, terms
2/10, n/30.
7 Purchased merchandise inventory from Bumble Bee Farms for cash, P45,000.
10 Returned merchandise inventory to Angel Rice Wholesaler and accounts were debited
for P5,000.
11 Paid freight charges related to purchases from Angel Rice Wholesaler, P2,000.
13 Paid all the outstanding balance to Angel Rice Wholesaler.
15 Sold goods for cash to Yellow Trading, P90,000.
17 Sold goods on account to Ziggy Vendo Rice P110,000, terms 2/10, n/30.
20 Granted credit to Ziggy Vendo Rice for returned goods, P10,000.
22 Paid freight charges related to sales to Ziggy Vendo Rice, P4,000.
27 Collected all balances due from Ziggy Vendo Rice.
30 Paid the following expenses: Salaries – P9,000; Utilities expense – P6,000.

Necessary adjustments:
1. Actual inventory at the end of the period is P42,000.
2. Unexpired portion of the Prepaid rent is P7,000.
3. Depreciation expense for the month should be P1,200.
Step 1 & 2:
Analyzing and Journalizing - PERIODIC

Jan. 1 Mr. Pedro Penduko invested additional cash in the business, P50,000.
3 Purchased merchandise inventory for cash from Angel Rice Wholesaler P55,000, terms
2/10, n/30.
7 Purchased merchandise inventory from Bumble Bee Farms for cash, P45,000.
10 Returned merchandise inventory to Angel Rice Wholesaler and accounts were debited
for P5,000.
11 Paid freight charges related to purchases from Angel Rice Wholesaler, P2,000.
13 Paid all the outstanding balance to Angel Rice Wholesaler.

Date Account titles F Debit Credit

Jan. 1 Cash 50,000

Penduko, Capital 50,000

3 Purchases 55,000
Accounts payable-Angel (2/10) 55,000

7 Purchases 45,000
Cash 45,000

10 Accounts payable-Angel 5,000

Purchase returns and allowances 5,000

11 Freight-in 2,000
Cash 2,000

13 Accounts payable-Angel 50,000

Cash 49,000
Purchase discounts (.02 x P50,000) 1,000
Step 1 & 2:
Analyzing and Journalizing - PERIODIC

15 Sold goods for cash to Yellow Trading, P90,000.

17 Sold goods on account to Ziggy Vendo Rice P110,000, terms 2/10, n/30.
20 Granted credit to Ziggy Vendo Rice for returned goods, P10,000.
22 Paid freight charges related to sales to Ziggy Vendo Rice, P4,000.
27 Collected all balances due from Ziggy Vendo Rice.
30 Paid the following expenses: Salaries – P9,000; Utilities expense – P6,000.

Date Account titles F Debit Credit

15 Cash 90,000
Sales 90,000

17 Accounts receivable-Ziggy (2/10) 110,000

Sales 110,000

20 Sales returns and allowances 10,000

Accounts receivable-Ziggy 10,000

22 Freight-out 4,000
Cash 4,000

27 Cash 98,000
Sales discounts (.02 x P100,000) 2,000
Accounts receivable-Ziggy 100,000

30 Salaries expense 9,000

Utilities expense 6,000
Cash 15,000
 Step 3:
Post the account balances to the General Ledger - Periodic

Date Account titles F Debit Credit Date Account titles F Debit Credit

Jan. 1 Cash (1) 50,000 15 Cash (1) 90,000

Penduko, Capital (70) 50,000 Sales (80) 90,000
3 Purchases (101) 55,000
Accounts payable-Angel (2/10) (49) 55,000 17 Accounts receivable-Ziggy (2/10) (4) 110,000
Sales (80) 110,000
7 Purchases (101) 45,000
Cash (1) 45,000 20 Sales returns and allowances (85) 10,000
Accounts receivable-Ziggy (4) 10,000
10 Accounts payable-Angel (49) 5,000
Purchase returns and allowances (102) 5,000 22 Freight-out (115) 4,000
Cash (1) 4,000
11 Freight-in (104) 2,000
Cash (1) 2,000 27 Cash (1) 98,000
Sales discounts (.02 x P100,000) (86) 2,000
13 Accounts payable-Angel (49) 50,000 Accounts receivable-Ziggy (4) 100,000
Cash (1) 49,000
Purchase discounts (.02 x P50,000) (103) 1,000 30 Salaries expense (105) 9,000
Utilities expense (106) 6,000
Cash (1) 15,000
 Step 3:
Post the account balances to the General Ledger - Periodic

CASH 1
Date Explanation Ref Debit Credit Balance PREPAID RENT 8
2020           Date Explanation Ref Debit Credit Balance
Jan 2020          
1 Beginning balance  J1 100,000   100,000
Jan 1 Beginning balance  J1 15,000   15,000
1 Cash investment  J1 50,000   150,000
7 Purchases  J1   45,000 105,000 EQUIPMENT 33
11 Freight-in  J1   2,000 103,000 Balanc
13 Payment of Accounts payable  J1   49,000 54,000 Date Explanation Ref Debit Credit e
15 Sales  J1 90,000   144,000 2020          
22 Freight-out  J1   4,000 140,000 Jan 1 Beginning balance  J1 77,600   77,600
27 Collection of receivables  J1 98,000   238,000
30 Payment of expenses  J1   15,000 223,000
ACCUMULATED DEPRECIATION - EQUIPMENT 34
Date Explanation Ref Debit Credit Balance
ACCOUNTS RECEIVABLE 4 2020          
Date Explanation Ref Debit Credit Balance Jan 1 Beginning balance  J1   8,400 8,400
2020          
Jan 17 Credit Sales to Ziggy  J1 110,000   110,000
ACCOUNTS PAYABLE 49
20 Returned goods from Ziggy  J1   10,000 100,000
Date Explanation Ref Debit Credit Balance
27 Collected accounts of Ziggy  J1   100,000 0
2020          
Jan 1 Beginning balance  J1   40,000 40,000
MERCHANDISE INVENTORY 6
3 Purchases from Angel  J1   55,000 95,000
Balanc
Date Explanation Ref Debit Credit e 10 Purchase returns to Angel  J1 5,000   90,000
2020         13 Payment of accounts payable to Angel  J1 50,000   40,000
Jan 1 Beginning balance   J1 60,000   60,000
 Step 3:Post the account balances to the General Ledger - Periodic
PENDUKO, CAPITAL 70 PURCHASE RETURNS AND ALLOWANCES 102
Date Explanation Ref Debit Credit Balance Date Explanation Ref Debit Credit Balance
2020           2020          
Jan 1 Beginning balance  J1   204,200 204,200 Jan 10 Returned goods to Angel  J1   5,000 5,000
1 Cash investment  J1   50,000 254,200 PURCHASE DISCOUNTS 103
Date Explanation Ref Debit Credit Balance
SALES 80
Date Explanation Ref Debit Credit Balance 2020          
2020           Jan 13 Payment to Angel   J1   1,000 1,000
Jan 15 Cash sales to Yellow Trading  J1   90,000 90,000 FREIGHT-IN 104
110,00 Date Explanation Ref Debit Credit Balance
17 Credit Sales to Ziggy  J1   0 200,000 2020          
Jan
SALES RETURN AND ALLOWANCES 85 11 Freight charges from purchases to Angel   J1 2,000   2,000
Date Explanation Ref Debit Credit Balance
2020           SALARIES EXPENSE 105
Jan 20 Returned goods from Ziggy  J1 10,000   10,000 Date Explanation Ref Debit Credit Balance
2020          
SALES DISCOUNTS 86
Jan 30 Payment of salaries  J1 9,000   9,000
Date Explanation Ref Debit Credit Balance
2020           UTILITIES EXPENSE 106
Jan Date Explanation Ref Debit Credit Balance
27 Collection of accounts from Ziggy  J1 2,000   2,000
2020          
PURCHASES 101 Jan 30 Payment of utilities  J1 6,000   6,000
Date Explanation Ref Debit Credit Balance
2020           FREIGHT-OUT 115
Jan Date Explanation Ref Debit Credit Balance
3 Credit purchase from Angel  J1 55,000   55,000 2020          
7 Cash purchase from Bumblebee  J1 45,000   100,000 Jan 22 Freight charges from sales to Ziggy  J1 4,000   4,000
Step 4:
Unadjusted trial balance preparation - PERIODIC

SUPER WHITE RICE RETAIL

Unadjusted Trial Balance
January 31, 2020

Debit Credit
Cash P223,000
Merchandise inventory 60,000
Prepaid rent 15,000
Equipment 77,600
Accumulated depreciation P8,400
Accounts payable 40,000
Penduko, Capital 254,200
Sales 200,000
Sales return and allowances 10,000
Sales discounts 2,000
Purchases 100,000
Purchase returns and allowances 5,000
Purchase discounts 1,000
Freight-in 2,000
Salaries expense 9,000
Utilities expense 6,000
Freight-out 4,000
Balance P508,600 P508,600
 Step 5 – Adjustments:
(a) Recording of Adjusting Journal Entries to the General journal

Necessary adjustments: Date Account titles F Debit Credit

1. Actual inventory at the end of the period is P42,000. 1/31 (1) Income and expense summary 60,000
2. Unexpired portion of the Prepaid rent is P7,000. Merchandise inventory
(Closing of the beginning inventory)
60,000

3. Depreciation expense for the month should be P1,200.

Merchandise inventory 42,000
Income and expense summary 42,000
(To recognize ending inventory)

(2) Rent expense 8,000

Prepaid rent 8,000

(3) Depreciation expense 1,200

Accumulated depreciation 1,200
 Step 5 – Adjustments
(b) Posting of Adjusting Journal Entries to the General Ledger

INCOME AND EXPENSE SUMMARY 200

Date Explanation Ref Debit Credit Balance
2020          
Date Account titles F Debit Credit Jan 31 AJE: Closing of beginning inventory  J1  60,000 60,000
31 AJE: Recognition of ending inventor  J1  42,000 18,000
1/31 (1) Income and expense summary (200) 60,000
PREPAID RENT 8
Merchandise inventory (6) 60,000
(Closing of the beginning inventory) Date Explanation Ref Debit Credit Balance
2020          
Merchandise inventory (6) 42,000 Jan 1 Beginning balance J1 15,000   15,000
Income and expense summary (200) 42,000 31 AJE: Expired portion of Prepaid rent J1   8,000 7,000
(To recognize ending inventory)
RENT EXPENSE 118
(2) Rent expense (118) 8,000 Date Explanation Ref Debit Credit Balance
Prepaid rent (8) 8,000
2020          
Jan 31 AJE: Expired portion of Prepaid rent  J1 8,000   8,000
(3) Depreciation expense (124) 1,200
Accumulated depreciation (34) 1,200
DEPRECIATION EXPENSE 124
Date Explanation Ref Debit Credit Balance
2020          
MERCHANDISE INVENTORY 6 Jan 31 AJE: Depreciation of equipment J1 1,200   1,200
Date Explanation Ref Debit Credit Balance
2020           ACCUMULATED DEPRECIATION - EQUIPMENT 34
Jan 1 Beginning balance  J1 60,000   60,000 Date Explanation Ref Debit Credit Balance
31 AJE: Closing of beginning inventory  J1   60,000 0 2020          
31 AJE: Recognition of ending inventory  J1 42,000   42,000 Jan 1 Beginning balance     8,400 8,400
31 AJE: Monthly depreciation  J1   1,200 9,600
Step 5 – Adjustments
(c) Preparation of Adjusted Trial Balance

SUPER WHITE RICE RETAIL

Adjusted Trial Balance - PERIODIC
January 31, 2020

Debit Credit
Cash P223,000
Merchandise inventory 42,000
Prepaid rent 7,000
Equipment 77,600
Accumulated depreciation P9,600
Accounts payable 40,000
Penduko, Capital 254,200
Sales 200,000
Sales return and allowances 10,000
Sales discounts 2,000
Purchases 100,000
Purchase returns and allowances 5,000
Purchase discount 1,000
Freight-in 2,000
Salaries expense 9,000
Utilities expense 6,000
Freight-out 4,000
Rent expense 8,000
Depreciation expense 1,200
Income and expense summary 18,000
Balance P509,800 P509,800
Step 6: Financial Statements preparation
(a) Statement of Financial Performance

SUPER WHITE RICE RETAIL

Statement of Financial Performance - PERIODIC
For the month ended January 31, 2020

Sales P200,000
Less: Sales returns and allowances 10,000
Sales discounts 2,000
Net Sales 188,000

Less: Cost of goods sold

Beginning inventory P60,000

Gross purchases P100,000
Less: Purchase returns and allowances 5,000
Purchase discounts 1,000
Net Purchases 94,000
Add: Freight-in 2,000
Cost of goods purchased 96,000
Cost of goods available for sale 156,000
Less: Inventory end 42,000
Cost of goods sold 114,000

Gross Profit 74,000

Less: Expenses
Salaries expense 9,000
Utilities expense 6,000
Freight-out 4,000
Rent expense 8,000
Depreciation expense 1,200 28,200

Net Income P45,800

Step 6: Financial Statements preparation
(b) Statement of Changes in Owner’s Equity; (c) Statement of Financial Position

SUPER WHITE RICE RETAIL

Statement of Financial Position
As of January 31, 2020
SUPER WHITE RICE RETAIL ASSETS
Statement of Changes in Owner’s Equity
Cash P223,000
For the month ended January 31, 2020 Merchandise inventory 42,000
Prepaid rent 7,000
Equipment P77,600
Beginning capital P204,200 Accumulated depreciation (9,600) 68,000
Add: Additional investment 50,000 Total Assets P340,000

Net income 45,800

Ending capital P300,000 LIABILITIES AND CAPITAL
Liabilities:
Accounts payable P40,000

Capital:
Penduko, Capital 300,000
Total Liabilities and Capital P340,000
 SUPER WHITE RICE RETAIL Statement of Changes in Owner’s Equity
Statement of Financial Performance - PERIODIC For the month ended January 31, 2020
For the month ended January 31, 2020
Beginning capital P204,200
Add: Additional investment 50,000
Net income 45,800
Sales P200,000 Ending capital P300,000
Less: Sales returns and allowances 10,000
Sales discounts 2,000
Net Sales 188,000
SUPER WHITE RICE RETAIL
Less: Cost of goods sold Statement of Financial Position
As of January 31, 2020
Beginning inventory P60,000
Gross purchases P100,000 ASSETS
Less: Purchase returns and allowances 5,000
Purchase discounts 1,000 Cash P223,000
Net Purchases 94,000
Merchandise inventory 42,000
Add: Freight-in 2,000
Prepaid rent 7,000
Cost of goods purchased 96,000
Cost of goods available for sale 156,000 Equipment P77,600
Less: Inventory end 42,000 Accumulated depreciation (9,600) 68,000
Cost of goods sold 114,000 Total Assets P340,000

Gross Profit 74,000

Less: Expenses LIABILITIES AND CAPITAL
Salaries expense 9,000 Liabilities:
Utilities expense 6,000
Accounts payable P40,000
Freight-out 4,000
Rent expense 8,000
Depreciation expense 1,200 28,200 Capital:
Penduko, Capital 300,000
Net Income P45,800 Total Liabilities and Capital P340,000
 Step 7: Closing of Temporary Accounts (income, expense, and drawing accounts) to the Capital account
Step 8: Posting of Closing Journal Entries

Closing journal entries: Posting: Filling-in Folio column

Date Account titles F Debit Credit Date Account titles F Debit Credit

1/31 Sales 200,000 1/31 Sales (80) 200,000

Purchase returns and allowances 5,000 Purchase returns and allowances (102) 5,000
Purchase discounts 1,000 Purchase discounts (103) 1,000
Income and expense summary 206,000 Income and expense summary (200) 206,000
(To close all nominal accounts with credit balance) (To close all nominal accounts with credit balance)

Income and expense summary 142,200 Income and expense summary (200) 142,200
Sales returns and allowances 10,000 Sales returns and allowances (85) 10,000
Sales discounts 2,000 Sales discounts (86) 2,000
Purchases 100,000 Purchases (101) 100,000
Freight-in 2,000 Freight-in (104) 2,000
Salaries expense 9,000 Salaries expense (105) 9,000
Utilities expense 6,000 Utilities expense (106) 6,000
Freight-out 4,000 Freight-out (115) 4,000
Rent expense 8,000 Rent expense (118) 8,000
Depreciation expense 1,200 Depreciation expense (124) 1,200
(To close all nominal accounts with debit balance) (To close all nominal accounts with debit balance)

Income and expense summary 45,800 Income and expense summary (200) 45,800
Penduko, Capital 45,800 Penduko, Capital (70) 45,800
(To close income and expense summary to Capital) (To close income and expense summary to Capital)
 Step 8: (a) Posting of Closing Journal Entries
SALES 80 PURCHASES 101
Date Explanation Ref Debit Credit Balance Date Explanation Ref Debit Credit Balance
2020           2020          
Jan 15 Cash sales to Yellow Trading J1   90,000 90,000 Jan 3 Credit purchase from Angel   55,000   55,000
17 Credit Sales to Ziggy J1   110,000 200,000 7 Cash purchase from Bumblebee   45,000   100,000
31 Closing of temporary accounts J1 200,000   0 31 Closing of temporary accounts J1   100,000 0
PURCHASE RETURNS AND ALLOWANCES 102 FREIGHT-IN 104
Date Explanation Ref Debit Credit Balance Date Explanation Ref Debit Credit Balance
2020           2020          
Jan 10 Returned goods to Angel J1   5,000 5,000 Jan 11 Freight charges from purchases to Angel   2,000   2,000
31 Closing of temporary accounts J1 5,000   0 31 Closing of temporary accounts J1   2,000 0
PURCHASE DISCOUNTS 103 SALARIES EXPENSE 105
Date Explanation Ref Debit Credit Balance Date Explanation Ref Debit Credit Balance
2020           2020          
Jan 13 Payment to Angel  J1   1,000 1,000 Jan 30 Payment of salaries J1 9,000   9,000
31 Closing of temporary accounts J1 1,000   0 31 Closing of temporary accounts J1   9,000 0
SALES RETURN AND ALLOWANCES 85 UTILITIES EXPENSE 106
Date Explanation Ref Debit Credit Balance Date Explanation Ref Debit Credit Balance
2020           2020          
Jan 20 Returned goods from Ziggy  J1 10,000   10,000 Jan 30 Payment of utilities J1 6,000   6,000
31 Closing of temporary accounts  J1   10,000 0 31 Closing of temporary accounts J1   6,000 0
SALES DISCOUNTS 86 FREIGHT-OUT 115
Date Explanation Ref Debit Credit Balance Date Explanation Ref Debit Credit Balance
2020           2020          
Jan 27 Collection of accounts from Ziggy J1 2,000   2,000 Jan 22 Freight charges from sales to Ziggy J1 4,000   4,000
31 Closing of temporary accounts J1   2,000 0 31 Closing of temporary accounts J1   4,000 0
Step 8: (a) Posting of Closing Journal Entries
RENT EXPENSE 118
Date Explanation Ref Debit Credit Balance
2020          
Jan 31 AJE: Expired portion of Prepaid rent   6,000   6,000
31 Closing of temporary accounts J1   6,000 0
DEPRECIATION EXPENSE 124
Date Explanation Ref Debit Credit Balance
2020          
Jan 31 AJE: Depreciation of equipment J1 1,200   1,200
31 Closing of temporary accounts J1   1,200 0
INCOME AND EXPENSE SUMMARY 200
Date Explanation Ref Debit Credit Balance
2020          
Jan 31 AJE: Closing of beginning inventory J1 60,000   60,000
31 AJE: Recognition of ending inventory J1   42,000 18,000
Closing of temporary accounts with Credit
31 balance J1   206,000 188,000
31 Closing of temporary accounts with Debit balance  J1 142,200   45,800
31 Closing of income and expense summary J1   45,800 0

PENDUKO, CAPITAL 70
Date Explanation Ref Debit Credit Balance
2020          
Jan 1 Beginning balance J1   204,200 204,200
1 Cash investment J1   50,000 254,200
31 Closing entry for Income and expense summary J1   45,800 300,000
Step 8: (b) Preparation of Post-Closing Trial Balance

SUPER WHITE RICE RETAIL

Post-Closing Trial Balance
January 31, 2020

Debit Credit
Cash P223,000
Merchandise inventory 42,000
Prepaid rent 7,000
Equipment 77,600
Accumulated depreciation P9,600
Accounts payable 40,000
Penduko, Capital 300,000
Balance P349,600 P349,600
 SUMMARY

Module No. 1 Title of Your Presentation