JOURNALIZING THE TRANSACTIONS

IN A MERCHANDISING BUSINESS
for Fundamentals of Accountancy, Business and Management 1
Senior High School (ABM)
Quarter 2 - Week 4
OBJECTIVES
K: differentiate periodic and perpetual inventory system of
journalizing in merchandising business.
S: record transactions of a merchandising business in the
general and special journals.
A: appreciate the importance of journalizing in a
merchandising business.

LEARNING COMPETENCY:

Record transactions of a merchandising business in the

general and special journals. ABM_FABM11-IVe-j-36

I. WHAT HAPPENED

Prior to the discussion on the journal entries in a merchandising business, we are

going to recall the first step in the accounting cycle discussed in previous
modules on financial and non-financial transactions. Identify what special
journal that is applicable for the following transactions. Write your answers in
your activity sheet/notebook.
1. Collected ₱10,000 from a customer in payment of his account.
2. Bought 100 pieces of mugs to be sold in the store amounting to ₱1,500
on account.
3. Sold two pieces of mugs to Y, ₱112 cash
4. Paid ₱20,000 monthly rental.
5. Paid salary of staff, ₱15,000

II. WHAT YOU NEED TO KNOW

As mentioned in the previous module, there are two methods in accounting

for inventory: the periodic inventory system and perpetual inventory system.

First, we are going to learn how to journalize using the periodic inventory
system. Using the same transaction discussed in periodic inventory system, we
are going to journalize using the perpetual inventory system.
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 PERIODIC INVENTORY SYSTEM
Recording purchases and related transactions under the Periodic Inventory
System

PURCHASES OF MERCHANDISE: PERIODIC SYSTEM

1. When merchandise is purchased for resale to customers, the account,
Purchases, is debited for the cost of goods purchased.
2. Like sales, purchases may be made for cash or on account (credit).
3. The purchase is normally recorded by the purchaser when the goods are
received from the seller.
• Each credit purchase should be supported by a purchase invoice.
• A purchase invoice received by the buyer is actually a sales
invoice or a charge invoice prepared by the supplier or vendor.
• Note that only purchases of merchandise are debited to the
‘Purchase’ account. Acquisition (purchases) of other assets:
supplies, equipment, and similar items are debited to their
respective accounts.

TO ILLUSTRATE:
Magaling Computer Store started its operations on January 2, 2016. The store is
located in Sikat Mall in Bicol. The owner invested ₱500,000 to start the business.
On January 3, 2016, Magaling purchased 20 units of computers on account for
₱10,000 each. Upon delivery of the units, the supplier, Delta, Inc., issued Charge
Invoice No. 145 to Magaling.

ENTRY:
GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/3/16 Purchases 200,00
Accounts Payable 200,000
To record purchase of 20 units of
computers at PHP 10,000 per unit from
Delta, Inc. as per Charge Invoice 145.

PURCHASE RETURNS AND ALLOWANCES

• A purchaser may find the merchandise received to be
unsatisfactory because the goods are: o damaged or defective
o of inferior quality
o not in accord with the purchaser’s specifications
• The purchaser initiates the request for a reduction of the balance due
through the issuance of a debit memorandum. The debit memorandum

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 is a document issued by a buyer to inform a seller that the seller’s
account has been debited because of unsatisfactory goods.
• A return of the merchandise (a deduction from the purchase price when
unsatisfactory goods are kept) is shown by the entry where Accounts
Payable is debited and Purchase Returns and Allowances is credited to
show that the purchases was reduced with a return or an allowance.
• The Purchase Returns and Allowances account is a “contra purchases”
account when merchandise is returned to a supplier.

TO ILLUSTRATE:
Out of the 20 computer units purchased last January 3, 2016, it was found after
inspection on the same day that one unit was damaged during shipment.
Magaling issued a debit memorandum (DM 01) and informed the supplier that
it will return the one damaged item.

ENTRY:
GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/3/16 Accounts Payable 10,000
Purchase Returns and Allowances 10,000
To record return of 1 unit of computers
worth PhP10,000 from Delta, Inc. as
per DM 01

ACCOUNTING FOR FREIGHT COSTS

The sales agreement should indicate whether the seller or the buyer is to pay
the cost of transporting the goods to the buyer’s place of business. The two
most common arrangements for freight costs are FOB Shipping Point and FOB
Destination.

FOB Shipping Point:

a. Goods placed free on board (FOB) the carrier by seller.
b. Buyer pays freight costs.
c. Freight-In is debited if buyer pays freight.
d. Cash is credited if the goods come on cash on delivery (COD), for
example, and was paid immediately. Accounts Payable would be
credited if on account.
e. Ownership over the goods is transferred to the buyer once it is out of the
premises of the seller.

FOB Destination
f. Goods placed free on board (FOB) at buyer’s business.
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 g. Seller pays freight costs.
h. Delivery Expense is debited if seller pays freight on outgoing
merchandise to a buyer. This is an operating expense to the seller.
i. Ownership over the goods is transferred to the buyer once the goods are
delivered and received by the buyer.

TO ILLUSTRATE:
Assume the supplier of Magaling is based in Manila. In order to bring the 20
computer units to Bicol, it will cost ₱3,000 to deliver the goods.

1. If the term is FOB Destination, no entry is recorded in the books of

Magaling. The ₱3,000 will be paid by the seller, in this case Delta, Inc.

2. If the term is FOB Shipping Point, the entry to record, assuming Magaling
paid the common carrier in cash on January 4, 2016 is:

ENTRY:
GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/4/16 Freight-In 3,000
Cash 3,000
To record freight costs for the purchase
of 20 units of computers

PURCHASE DISCOUNTS
• Credit terms (specify the amount of cash discount and time period
during which a discount is offered) may permit the buyer to claim a cash
discount for the prompt payment of a balance due. If the credit terms
show 2/10, n/30 means a 2% discount is given if paid within 10 days
(called the discount period); otherwise, the invoice is due in 30 days.
• The buyer calls this discount a purchase discount.
• A purchase discount is normally based on the invoice cost less returns
and allowances, if any.

TO ILLUSTRATE
The credit terms for the purchase of 20 computer units (total cost ₱200,000) is
2/10, n/30. This means that if Magaling pays on or before January 13, 2016, it is
entitled to a 2% discount, otherwise Magaling will have to pay the full amount
on or before February 4, 2016 (30 days after purchase). On January 10, 2016,
Magaling paid the account in full of Delta.
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ENTRY:
GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/10/16 Accounts Payable 200,000
Purchase Discount 4,000
Cash 196,000
To record full payment of Delta,
Charge Invoice No.145 with 2%
discount computed as PhP200,000 x 2

Assuming that instead of paying on January 10, 2016, Magaling paid on

February 4, 2016, thus forfeiting the 2% discount, the entry to record is:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

2/4/16 Accounts Payable 200,000
Purchase Discount 200,000
To record full payment of Delta, Charge Invoice No.
145

RECORDING OF SALES AND RELATED TRANSACTIONS UNDER THE PERIODIC

INVENTORY SYSTEM

SALES TRANSACTIONS: REVENUE ENTRIES FOR A MERCHANDISER

• Revenues are reported when earned in accordance with the revenue
recognition principle, and in a merchandising company, revenues are
earned when the goods are transferred from seller to buyer.
• All sales should be supported by a document such as a cash register
tape (to provide evidence of cash sales) or cash receipt, or office
receipt for cash sales, and charge invoice for credit sales, or sales on
account.
• One entry is made with each sale:
o Debit — Accounts Receivable (if a credit sale) or Cash (if a cash
sale) which increases assets for the sales amount
o Credit — Sales which increases revenues
• The sales account is credited only for sales of goods held for resale. Sales
of assets not held for resale (such as equipment, buildings, land, etc.) are
credited directly to the asset account.
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TO ILLUSTRATE:
For the month of January, Magaling made the following sale:

1/10/2016 Official Receipt (OR) No. 001 Sold two units for cash to Marie Cruz for
₱36,000 (₱18,000 per unit), FOB Destination

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/10/16 Cash 36,000
Sales 36,000
To record OR No. 001 cash sale – Marie Cruz

1/15/2016 Charge Invoice (ChI) No. 001 Sold five units on account to Rafael
Reyes for ₱97,500 (₱19,500 per unit) with terms 3/10, n/ 30,
FOB Shipping Point
GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/15/16 Accounts Recievable 97,500
Purchase Discount 97,500
To record Charge Invoice No. 001 Rafael
Reyes on account with terms 3/10, n/30

Note: Some companies do not avail of discounts. There are times when
companies do not have sufficient cash to settle the liability. Sometimes
it is best to avail of the discount because this will lower the cost and
therefore increase the profit of the business.

FREIGHT TERMS: FOB DESTINATION — SELLER PAYS FREIGHT

j. An entry is made when seller pays the freight to deliver goods to a
customer or buyer. If the buyer will pay for the freight, no entry is made.
k. Debit — Delivery Expense and credit — Cash or Accounts Payable

Note: Review the discussion on Accounting Concepts and Principles about

revenue recognition principle.

TO ILLUSTRATE:

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On January 10, 2016 Magaling paid MM Express, ₱500 to deliver the two units
to Marie Cruz.

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/10/16 Delivery Expense 500
Cash 500
To record full payment of Delta Charge Invoice No.
145

Take note that no entry will be made regarding the sale to Rafael Reyes since
the term is FOB Shipping Point.

SALES RETURNS AND ALLOWANCES:

l. Sales Returns result when customers are dissatisfied with merchandise
and are allowed to return the goods to the seller for credit or a refund.
m. Sales Allowances result when customers are dissatisfied, and the seller
allows a deduction from the selling price.
n. To grant the return or allowance, the seller prepares a credit
memorandum to inform the customer that a credit has been made to
the customer’s account receivable.
o. Sales Returns and Allowances is a contra revenue account to the Sales
account. A contra account is a reduction to a particular account.
p. A contra account is used, instead of debiting sales, to disclose the
amount of sales returns and allowances in the accounts.
q. This information is important to management as excessive returns and
allowances suggest inferior merchandise, inefficiencies in filling orders,
errors in billing customers, and mistakes in delivery or shipment of goods.
r. The normal balance of Sales Returns and Allowances is a debit.
s. One entry is made with each sales return and allowance. The entry to
record the sales return or allowance:
o Debit — Sales Return and Allowances which decreases revenues
for the amount of the sale
o Credit — Accounts Receivable (if a credit sale) or Cash (if a cash
sale) which decreases assets

TO ILLUSTRATE:
On January 16, 2016, Rafael Reyes returned one unit of the computers
purchased last January 15, 2016 under Charge Invoice 001. The unit returned
was in good condition. However, Rafael Reyes returned the unit because it is
one unit more than what they need. The return was approved and accepted
by Magaling. The price will be deducted from the account of Rafael Reyes.

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ENTRY:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/10/16 Sales Return & Allowances 19,500
Accounts Receivable 19,500
To record return of one unit of computers
fromRafael Reyes under Charge Invoice
001

SALES DISCOUNTS
1. A sales discount is the offer of a cash discount to encourage customers
to pay the balance at an earlier date.
2. An example of a discount term is commonly expressed as: 2/10, n/30,
which means that the customer is given 2% discount if payment is made
within 10 days. After 10 days there is no discount, and the balance is due
in 30 days.
3. Sales Discounts is a contra revenue account with a normal debit
balance.

TO ILLUSTRATE:
Assume that Magaling purchased on cash, five units of computers at ₱10,000
per unit from a supplier on January 17, 2016. These units were subsequently
sold to Jun Cruz on January 18, 2016 under Charge Invoice (ChI) No. 002
amounting to ₱90,000 (₱18,000 per unit) with terms 2/10, n/30, FOB Shipping
Point. On January 23, 2016, Cruz paid the said account in full.

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/17/16 Purchases 50,000
Cash 50,000
To record purchased on cash five units
of computers

1/18/16 Accounts Recievable 90,000

Sales 90,000

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 To record sales on account under
Charge Invoice No. 002 to Jun Cruz
with terms 2/10, n/30

1/23/16 Cash 88,200

Sales Discount 1,800
Accounts Receivable 90,000
To record collection of accounts
receivable from Jun Cruz net of 2%
sales discount

Notice in the entry on January 23, 2016 that the cash received from Jun Cruz
was net of the 2% discount because he made the payment within the discount
period. Take note that the discount period in this case was from January 19,
2016 to January 28, 2016 (10 days).

What If Jun Cruz paid the account on January 30, 2016 instead of January 23,
2016? The entry would be:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/30/16 Cash 90,000
Accounts Receivable 90,000
To record collection of accounts
receivable from Jun Cruz

Note: The amount indicated here is not connected with the journal entries
prepared above. This is for illustration purposes only.

DETERMINING COST OF GOODS SOLD UNDER PERIODIC INVENTORY SYSTEM

Goods Sold under the periodic inventory system is determined at the end of
the period (monthly or yearly) by a short computation, as follows:

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 Cost of goods sold:
Merchandise Inventory, Beginning 100,000
Purchase 250,000
Less: Purchases returns and allowances 5,000
Purchases discounts 2,000 7,000
Net Purchases 243,000
Add: Freight in 6,000
Cost of goods purchased 249,000
Cost of goods available for sale 349,000
Merchandise Inventory, Ending 118,570
Cost of goods sold 230,250

In a periodic inventory system, separate ledger accounts are maintained for

various items composing the cost of goods sold (Purchases, Purchase Returns
& Allowances, Freight-In, Purchase Discounts). At the end of the accounting
period, a physical count of inventory is necessary to establish the ending
balance of the inventory.

PERPETUAL INVENTORY SYSTEM

PURCHASES OF MERCHANDISE: PERPETUAL SYSTEM

TO ILLUSTRATE:
Magaling Computer Store started its operations on January 2, 2016. The store is
located in Sikat Mall in Bicol. The owner invested ₱500,000 to start the business.
On January 3, 2016, Magaling purchased 20 computer units on account for
₱10,000 each. Upon delivery of the units, the supplier Delta, Inc. issued a
Charged Invoice No. 145 to Magaling.

ENTRY:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/3/16 Inventory (Merchandise Inventory) 200,000
Accounts Payable 200,000
To record purchased of 20 units of
computers at PhP10,000 per unit from
Delta, as per Charge Invoice 145

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PURCHASE RETURNS AND ALLOWANCES

TO ILLUSTRATE:
Out of the 20 units of the computers purchased last January 3, 2016, it was
found out after inspection on the same day that one unit was damaged during
shipment. Magaling issued a debit memorandum (DM 01) and informed the
supplier that it will return the one damaged unit.

ENTRY:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/3/16 Accounts Payable 10,000
Inventory 10,000
To record of 1 unit computer, PhP10,000
unit from Delta, Inc. as per DM 01

ACCOUNTING FOR FREIGHT COSTS

TO ILLUSTRATE:
Assuming the supplier of Magaling is based in Manila and in order to bring the
20 computer units to Bicol it will cost ₱3,000 to deliver the goods.

1. If the terms is FOB Shipping Point, the entry to record, assuming Magaling
paid in cash the common carrier on January 4, 2016 is:
ENTRY:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/4/16 Inventory 3,000
Cash 3,000
To record freight costs for the purchase of 20 units
computer

2. If the terms is FOB Destination, no entry is recorded in the books of

Magaling. The ₱3,000 will be paid by the seller, in this case Delta, Inc.

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PURCHASE DISCOUNTS

TO ILLUSTRATE:
The credit terms for the purchased of 20 computer units (total cost ₱200, 000) is
2/10, n/30. This means that if Magaling pays on or before January 13, 2016, it is
entitled to a 2% discount. Otherwise, they will have to pay the full amount on
or before February 4, 2016 (30 days after purchase). On January 10, 2016,
Magaling paid in full the account with Delta.
ENTRY:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/10/16 Accounts Payable 200,000
Merchandise Inventory 4,000
Cash 196,000
To record full payment of Delta Charge
Invoice No. 145 with 2% discount
computed as PhP200,000 x 2%

Assuming that instead of paying on January 10, 2016, Magaling paid on

February 4, 2016, thus forfeiting the 2% discount, the entry to record is:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

2/4/16 Accounts Payable 200,000
Cash 200,000
To record full payment of Delta
Charge Invoice No. 145

RECORDING OF SALES AND RELATED TRANSACTIONS UNDER THE PERPETUAL

INVENTORY SYSTEM

SALES TRANSACTIONS: REVENUE ENTRIES FOR A MERCHANDISER

TO ILLUSTRATE:
Assume that no freight costs were incurred when the 20 computer units were
purchased.

For the month of January, Magaling made the following sale:

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For the month of January, Magaling made the following sale:

1/10/2016 Official Receipt (OR) No. 001 Sold two units for cash to Marie Cruz for
₱36,000 (₱18,000 per unit), FOB Destination

1/15/2016 Charge Invoice (ChI) No. 001 Sold five units on account to Rafael
Reyes for ₱97,500 (₱19,500 per unit) with terms 3/10, n/ 30, FOB
Shipping Point

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/10/16 Cash 36,000
Sales 36,000
Cost of Goods Sold 20,000
Inventory 20,000
To record OR No. 001 cash sale-Marie
Cruz

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/15/16 Accounts Receivable 97,500
Sales 97,500
Cost of Goods Sold 50,000
Inventory 50,000
To record Charge Invoice No. 001 Rafael
Reyes on account with terms 3/10, n/30

FREIGHT TERMS: FOB DESTINATION — SELLER PAYS FREIGHT

TO ILLUSTRATE:

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On January 10, 2016 Magaling paid MM Express, ₱500 to deliver the two units
to Marie Cruz.

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/10/16 Delivery 500
Cash 500
To record full payment of Delta Charge
Invoice No. 145

Take note that no entry will be made as to the sale to Rafael Reyes since the
term is FOB Shipping Point.

SALES RETURNS AND ALLOWANCES

TO ILLUSTRATE:
On January 16, 2016, Rafael Reyes returned one unit of the computers
purchased last January 15, 2016 under Charge Invoice 001. The unit returned
was in good condition. However, Rafael Reyes returned the unit because it is
one unit more than what they need. The return was approved and accepted
by Magaling. The price will be deducted from the account of Rafael Reyes.

ENTRY:

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/16/16 Sales Return and Allowances 19,500
Accounts Receivable 19,500

Merchandise Inventory 10,000

Costs of Goods Sold 10,000
To record return of one unit computer
from Rafael Reyes under Charge Invoice
No. 001

SALES DISCOUNTS

TO ILLUSTRATE:
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Assume Magaling purchased five units of computers on cash for ₱10,000 per
unit from a supplier on January 17, 2016 that were subsequently sold to Jun
Cruz on January 18, 2016 under Charge Invoice (ChI) No. 002 amounting to
₱90,000 (₱18,000 per unit) with terms 2/10, n/30, FOB Shipping Point. On
January 23, 2016, Cruz paid the said account in full.

GENERAL JOURNAL

DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT

1/17/16 Inventory 50,000
Cash 50,000
To record five units of computers
purchased on cash

1/18/16 Accounts Receivable 90,000

Sales 90,000
Costs of Goods Sold 50,000
Inventory 50,000
To record sales on account under
Charge Invoice No. 002 to Jun Cruz with
terms 2/10, n/30
1/23/16 Cash 88,200
Sales Discount 1,800
Accounts Receivable 90,000
To record collection of accounts
receivable from Jun Cruz, net of 2%
sales discount

Notice in the entry on January 23, 2016 that the cash received from Jun Cruz
was net of the 2% discount because he made the payment within the discount
period. Take note that the discount period in this case is from January 19, 2016
to January 28, 2016 (10 days).

What If Jun Cruz paid the account on January 30, 2016 instead of January 23,
2016? The entry should be:

GENERAL JOURNAL

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 DATE ACCOUNT AND EXPLANATION REF DEBIT CREDIT
1/23/16 Cash 90,000
Accounts Receivable 90,000
To record collection of accounts
receivable from Jun Cruz

DETERMINING COST OF GOODS SOLD UNDER THE PERPETUAL

INVENTORY SYSTEM
The Cost of Goods Sold under the perpetual inventory system is determined
by getting the running balance in the general ledger of the account. Recall
the previous discussion on posting the journal entries to the general ledger. At
any point in time, you can determine the cumulative cost of goods sold
under the perpetual inventory system because in this system a separate
general ledger for “Cost of Goods Sold” is maintained.

The Flow of Inventory Costs

Under the periodic inventory system, physical count is necessary to determine
the ending balance of merchandise inventory. After the count, the costs of
these inventory items will be computed. There are instances that the unit
prices for merchandise purchased are different. Consider the scenario
presented below.

Geo San is in the business of buying and selling canned sardines. On January
2016, Geo had the following transactions:

1/1/16 Merchandise inventory on hand 1,000 cans @ ₱10/can ₱ 10,000

1/10/16 Purchased 5,000 cans @ ₱11/can 55,000
1/20/16 Purchased 4,000 cans @ ₱21/can 48,000
Total ₱ 113,000

During the month of January, the total sales in units is 7,000. Therefore, the
ending inventory in units is 3,000 cans of sardines (1,000+5,000+4,000-7,000). The
problem now is the unit cost that will be used to determine the value of the
ending inventory. This is where the cost flow assumption is needed.

The two most commonly used cost flow assumptions are:

t. Average Cost – Using the above example, average unit cost is simply
computed by dividing the total cost (₱113,000) by total quantities
(1,000 + 5,000 + 4,000) 11,000. Average unit cost is ₱11.30
The cost of merchandise inventory ending is 3,000 × ₱11.30 = ₱33,900

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 • First in, First Out (FIFO) – As the name implies, FIFO involves the ssumption
that goods sold are the first units that were purchased - that means the
oldest goods on hand. Thus, the remaining inventory is comprised of the
most recent purchases. Applying this to the problem above, the 7,000
units sold were taken from:
1,000 @ ₱10 + 5,000 @ ₱11 + 1,000 @ ₱12 = 7,000 units

Therefore, the ending inventory will come from the January 20

purchases: 3,000 @ ₱12 = ₱36,000

III. WHAT HAVE I LEARNED

The term “inventory” includes the value of raw materials, consumable, spares,
work-in-progress, finished goods and scrap in which a company’s funds have
been invested. As per International Accounting Standard 2 (IAS-2),
“inventories” mean tangible properties held:
• for sale in the ordinary course of business;
• in the process of production for such sale; and
• for consumption in the production of goods or services for sale.

There are two methods of recording inventory, i.e., Periodic Inventory System
and Perpetual Inventory System. In case of Periodic Inventory System, the value
and quantity of Inventory is ascertained by physically connoting the stock at
the end of the year. Perpetual inventory system means running record of
inventories on hand and provides the inventory balance at any time desired.

EVALUATION:
A company had the following transactions during December:
• Sold merchandise on credit for ₱5,000, terms 3/10, n/30. The items sold had
a cost of ₱3,500.
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• Purchased merchandise for cash, ₱720.
• Purchased merchandise on credit for ₱2,600, terms 1/20, n/30.
• Issued a credit memorandum for ₱300 to a customer who returned
merchandise purchased on November 29. The returned items had a cost of
₱210.
• Received payment for merchandise sold on December 1.
• Received a credit memorandum for the return of faulty merchandise
purchased on December 4 for ₱600.
• Paid freight charges of ₱200 for merchandise ordered last month (FOB
shipping point).
• Paid for the merchandise purchased on December 4, less the portion that
was returned.
• Sold merchandise on credit for ₱7,000, terms 2/10, n/30. The items had a
cost of ₱4,900.
• Received payment for merchandise sold on December 24.

Required: Prepare the general journal entries to record these transactions using
a perpetual inventory system. (Record all purchases initially at the gross invoice
amount)

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 REFERENCES

Andres, Carlsberg S., Arthur, Jr. P Barrido, and Christopher B Honorario. 2016.
Teaching Guide for Senior High School: Fundamentals of Accountancy,
Business, and Management 1. Quezon City.

Shekhar, Chandra. 2020. Introduction to Accounting. Accessed November 9,

2020. https://www.ketabton.com/book/12985/introduction-
toaccounting/read.

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 DEPARTMENT OF EDUCATION
SCHOOLS DIVISION OF NEGROS ORIENTAL

SENEN PRISCILLO P. PAULIN, CESO V

Schools Division Superintendent

FAY C. LUAREZ, TM, Ed.D., Ph.D.

OIC - Assistant Schools Division SuperintendentActing CID Chief

NILITA L. RAGAY, Ed.D.

OIC - Assistant Schools Division Superintendent

ROSELA R. ABIERA
Education Program Supervisor – (LRMS)

ARNOLD R. JUNGCO
Education Program Supervisor – (SCIENCE & MATH)

MARICEL S. RASID
Librarian II (LRMDS)

ELMAR L. CABRERAPDO II (LRMDS)

MARK ANTHONY T. LUMAGAS

Writer

IVANNE RAY A. GIDORLay-out Artist

_________________________________

ALPHA QA TEAM
RICKLEOBEN V. BAYKING
LITTIE BETH S. BERNADEZ
MERCYDITHA D. ENOLPE
RONALD TOLENTINO

BETA QA TEAM
RICKLEOBEN V. BAYKING
LITTIE BETH S. BERNADEZ
GIL S. DAEL
MARIA SOLEDAD M. DAYUPAY
MARIA ACENITH D PASTOR
JEE LIZA T. INGUITO
MERCYDITHA D. ENOLPERONALD G. TOLENTINO

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 DISCLAIMER
The information, activities and assessments used in this material are designed to provide accessible learning modality to the teachers and learners
of the Division of Negros Oriental. The contents of this module are carefully researched, chosen, and evaluated to comply with the set learning
competencies. The writers and evaluator were clearly instructed to give credits to information and illustrations used to subs tantiate this material.
All content is subject to copyright and may not be reproduced in any form without expressed written consent from th e division.

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 SYNOPSIS AND ABOUT THE AUTHOR

SYNOPSIS
This Self Learning Kit (SLK) is all about the guidelines to be followed in
journalizing the accounting cycle of a merchandising business, particularly the
Periodic Inventory System and the Perpetual Inventory System. This knowledge is
very important for ABM students to develop their bookkeeping skills which is an
important requirement to pass the NCIII bookkeeping TESDA assessment.
In this learning kit the students w ill gain knowledge in applying the
accounting cycle with sufficient knowledge to complete the cycle which
enhances their bookkeeping skills whether to be applied in a small sari -sari
store or a larger company .

ABOUTH THE AUTHOR

Mr. Mark Anthony T. Lumagas finished his Bachelor’s Degree in

Science Major in Mathematics at Foundation University,

Dumaguete City on March 2010. He then worked as a Quality Assurance Staff

at SPi Global. After more than a year he taught at
Foundation University teaching Mathematics to college students
(2011-2014). He also worked part-time Math Instructor at Negros
Oriental State University Siaton Campus (2013-2014). Currently he is

a Teacher 2 at Giligaon High School of Siaton 4 District in the

Division of Negros Oriental (2018-present).
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