Handout – Accounting Cycle for Merchandising Business
By: Joshua A. Eisma
Illustrative Exercise
Year: 2015
Date
June 1
Transaction
Leo, the owner, invested ₱ 300,000 in cash and ₱ 50,000 worth of merchandise into the business. The
merchandise has an unpaid ₱ 10,000 account from Noir to be assumed by the business. [OR #001]
2 Purchased from Gianne store supplies worth ₱ 5,000 on cash basis [CV #001]
3 Returned ₱500 worth of store supplies purchased from Gianne [OR #002]
4 Purchased from Michael store supplies worth ₱ 2,000 on account
5 Returned ₱ 400 worth of store supplies purchased from Michael
6 Purchased from Jasper store equipment worth ₱ 30,000 on cash basis [CV #002]
7 Was granted a ₱ 3,500 allowance on store equipment purchased from Jasper [OR #003]
8
Purchased from Kendra store equipment worth ₱ 40,00 on terms ₱ 10,000 down, balance on account [CV
#003]
9 Was granted a ₱ 3,500 allowance on store equipment purchased from Kendra
10 Received from Meralco the electricity bill for the month of May worth ₱ 10,000
Paid rent for the month, ₱ 20,000 [CV #004]
11 Purchased from Agustus, merchandise on cash basis, ₱ 10,000 [CV #005]
Paid freight on merchandise purchased from Agustus, ₱ 500 [CV #006]
12
Paid the utility bill received last June 10 [CV #007]
Purchased from Brian merchandise worth ₱ 15,000 on terms 2/10, n/30
The owner invested additional merchandise worth ₱ 12,000 into the business
13 Purchased from Cesarina merchandise worth ₱ 20,000 on terms 50% down, balance 2/10, n/30 [CV
#008]
14 Returned ₱ 500 worth of merchandise purchased from Agustus [OR #004]
Returned ₱ 1,000 worth of merchandise purchased from Brian
15 Sold to Dianne merchandise on cash basis, ₱ 10,000 [OR #005]
Paid freight on merchandise sold to Dianne, ₱ 800 [CV #009]
16
17
Returned ₱ 1,500 worth of merchandise purchased from Cesarina
Sold to Ellaine merchandise worth ₱ 15,000 on terms 2/10, n/30 [SI #001]
Paid ₱ 2,000 in partial payment of account with Cesarina [CV #010]
Sold to Franklin merchandise worth ₱ 20,000 on terms 50% down, balance 2/10, n/30 [OR #006]
18 Received the return of ₱ 500 worth of merchandise sold to Dianne [CV #011]
19 Received the return of ₱ 1,000 worth of merchandise sold to Ellaine
20 Received the return of ₱ 1,500 worth of merchandise sold to Franklin
21 Collected ₱ 2,000 from Franklin for partial payment of account [OR #007]
22 Paid in full account with Brian [CV #012]
26 Collected in full account with Ellaine [OR #008]
Page 1 of 7
Handout – Accounting Cycle for Merchandising Business
By: Joshua A. Eisma
The owner withdrew merchandise worth ₱ 5,000 for personal use
30 Paid in full account with Cesarina [CV #013]
Collected in full the account with Franklin [OR #009]
THE SQUID PLAY
Chart of Accounts
Page 2 of 7
Handout – Accounting Cycle for Merchandising Business
By: Joshua A. Eisma
JOURNAL ENTRIES
1-Jun
2
3
Cash
Merchandise Inventory
Accounts Payable - Noir
Leo, Capital
300,000
50,000
10,000
340,000
Store Supplies
Cash
Cash
5,000
5,000
500
Store Supplies
4
5
500
Store Supplies
Accounts Payable - Michael
Accounts Payable - Michael
2,000
2,000
400
Store Supplies
6
7
8
9
10
11
Store Equipment
Cash
Cash
Store Equipment
Store Equipment
Cash
Accounts Payable - Kendra
Accounts Payable - Kendra
Store Equipment
400
30,000
30,000
3,500
3,500
40,000
10,000
30,000
3,000
3,000
Utilities Expense
Accounts Payable - Meralco
10,000
Rent Expense
Cash
20,000
10,000
20,000
Page 3 of 7
Handout – Accounting Cycle for Merchandising Business
By: Joshua A. Eisma
10,000
10,000
Purchases
Cash
Freight-in
500
Cash
12
13
14
500
Accounts Payable - Meralco
Cash
10,000
Purchases
Accounts Payable - Brian
15,000
Purchases
Leo, Capital
12,000
Purchases
Cash
Accounts Payable - Cesarina
20,000
Cash
10,000
15,000
12,000
10,000
10,000
500
Purchase Return and Allowance
15
500
Accounts Payable - Brian
Purchase Return
1,000
1,000
Cash
Sales
Freight-out
10,000
10,000
800
Cash
16
Accounts Payable - Cesarina
Purchase Return
Accounts Receivable - Ellaine
Sales
17
Accounts Payable - Cesarina
Cash
800
1,500
1,500
15,000
15,000
2,000
2,000
Page 4 of 7
Handout – Accounting Cycle for Merchandising Business
By: Joshua A. Eisma
Cash
Accounts Receivable - Franklin
Sales
18
Sales Return and Allowance
10,000
10,000
20,000
500
Cash
19
20
21
22
500
Sales Return
Accounts Receivable - Ellaine
1,000
Sales Return
Accounts Receivable - Franklin
1,500
Cash
Accounts Receivable - Franklin
2,000
1,000
1,500
2,000
Accounts Payable - Brian
Cash
14,000
13,720
Purchase Discount
26
Cash
Sales Discount
Accounts Receivable - Ellaine
30
280
13,720
280
14,000
Leo, Drawing
Purchases
5,000
Accounts Payable - Cesarina
Cash
6,500
Cash
Accounts Receivable - Franklin
6,500
5,000
6,500
6,500
Page 5 of 7
Handout – Accounting Cycle for Merchandising Business
By: Joshua A. Eisma
CASH
Date
Debit
1
Credit
300,000
3
500
7
3,500
14
500
Date
5,000
2
30,000
6
10,000
8
20,000
11
10,000
11
15
10,000
17
10,000
21
2,000
10,000
12
26
13,720
10,000
13
30
6,500
2,000
15
17
13,720
6,500
18
22
30
500
11
800
500
346,720
TOTAL:
Date
119,020
227,700
Accounts Receivable
Debit
Credit
Date
16
15,000
1,000
19
17
10,000
1,500
2,000
14,000
6,500
25,000
20
21
26
30
25,000
TOTAL:
Date
1
Merchandise Inventory
Debit
Credit
50,000
50,000
TOTAL:
Date
Date
-
50,000
Store Supplies
Debit
Credit
Date
Page 6 of 7
Handout – Accounting Cycle for Merchandising Business
By: Joshua A. Eisma
2
5,000
500
3
4
2,000
400
5
7,000
900
TOTAL:
Date
6,100
Store Equipment
Debit
Credit
Date
6
30,000
3,000
7
8
40,000
70,000
3,500
6,500
9
TOTAL:
63,500
Page 7 of 7