NCIII BOOKKEEPING
REVIEW
KIM
NICOLE
M.
REYES,
CPA,
TESDA CERTIFIED
MBM,
C T T,
BOOKKEEPER
MRITAX
COMPETENCY MAP FOR NCIII
BOOKKEEPING
• Basic Competencies
• Lead workplace communication
• Lead small teams
• Develop and practice negotiation skills
• Solve problems related to work activities
• Use mathematical concepts & techniques
• Use relevant technologies
COMPETENCY MAP FOR NCIII
BOOKKEEPING
• Common Competencies
• Apply quality standards
• Perform computer operations
• Maintain an effective relationship with clients and
customers
• Manage own performance
COMPETENCY MAP FOR NCIII
BOOKKEEPING
• Core competencies
• Journalize transactions
• Post transactions
• Prepare trial balance
• Prepare financial reports
• Review internal control system
BOOKKEEPING COVERAGE
• Chart of Accounts
• Bonus Questions worth 20 points
• General Journal
• RE: Adjusting Entries
• General Ledger
• Preliminary Trial Balance
• Statement of Performance
• Statement of Equity
• Statement of Financial Position
• Statement of Cash Flow
• Journalize & Post Closing Entries
• Post-Closing Trial Balance
ACCOUNTING CYCLE OF A
MERCHANDISING
BUSINESS
KIM
NICOLE
M.
REYES,
CPA,
MBM,
CTT
MERCHANDISING BUSINESS
• One that buys and sells goods without changing their physical
form
• One of the main difference between a merchandising business
and a service business is that a merchandising business
necessarily holds inventory of physical goods for sale.
INVENTORY
• Refers to the goods that a merchandising business has
purchased and primarily intended for resale, normally in their
original form and without any further processing.
• Two types:
• Perpetual inventory system
• Periodic inventory system
PERPETUAL INVENTORY SYSTEM
• Under this system, the “Inventory” account (or
Merchandise Inventory account) is updated each time a
purchase of sale is made.
• The “Inventory” account then shows a continuing or
running balance of the goods on hand.
PERPETUAL INVENTORY SYSTEM
• “stock cards” and “stock ledger cards” are maintained
under this system, from which the quantities and
balances of goods on hand and goods sold can be
determined at any given point of time without the need
of performing a physical count of inventories
PERPETUAL INVENTORY SYSTEM
• Used for inventories that are specifically identifiable and
are relatively high valued
• Examples includes businesses dealing with:
• Cars
• Machineries
• Furniture
• Heavy equipment
PERIODIC INVENTORY SYSTEM
• The “inventory” account is updated only when a
physical count of inventory is performed.
• The amounts of inventory and cost of goods sold are
determined only periodically.
PERIODIC INVENTORY SYSTEM
• The business does not maintain records that show the
running balances of inventory on hand and cost of
goods sold as at any given point of time.
• A physical count of the quantity of goods on hand must
be performed periodically (daily, weekly, monthly or
annual)
PERIODIC INVENTORY SYSTEM
• The quantity counted is then multiplied by the unit cost
to get the balance of the “Inventory” account.
• This amount is then used to compute for the cost of
goods sold.
I N V O LV E D A C C O U N T S
• Purchases – the account used to record purchases of inventory under the periodic
system
• Freight-in (Transportation In) – the account used to record the shipping costs incurred on
purchases of inventory under the periodic system
• Purchase returns – the account used to record returns of purchased goods to the
supplier
• Purchase discounts – the account used to record cash discounts availed of on the
purchased goods.
SAMPLE BUSINESS
TRANSACTIONS
RECORDING
BOTH
PERPETUAL AND
FOR
PERIODIC
SYSTEM
SOLD MERCHANDISE ON ACCOUNT
COSTING P8,000 FOR 10,000; TERMS
WERE 2/10, N/30
Perpetual System
Account Receivable 10,000
Sales
Cost of Goods Sold
Inventory
10,000
8,000
8,000
Periodic System
Account Receivable 10,000
Sales
10,000
CUSTOMER RETURNED
M E R C H A N D I S E C O S T I N G P 4 0 0 T H AT
HAD BEEN SOLD ON ACCOUNT FOR
P 5 0 0 ( PA R T I F T H E P 1 0 , 0 0 0 S A L E ) :
Perpetual System
Sales Returns & Allowances 500
Account Receivable
500
Inventory
400
Cost of Goods Sold
400
Periodic System
Sales Returns & Allowances 500
Account Receivable
500
R E C E I V E D PAY M E N T F R O M T H E
CUSTOMER MERCHANDISE SOLD
[ C A S H D I S C O U N T TA K E N : ( P 1 0 , 0 0 0
SALE – P500 RETURN) X 2%
DISCOUNT = 190]:
Perpetual System
Cash
9,310
Sales Discounts
190
Periodic System
Cash
9,310
Sales Discounts
190
Account Receivable
Account Receivable
9,500
9,500
4. PURCHASED ON ACCOUNT
MERCHANDISE FOR RESALE FOR
P6,000; TERMS WERE 2/10, N/30
( P U R C H A S E D R E C O R D E D AT I N V O I C E
PRICE):
Perpetual System
Inventory
6,000
Accounts Payable
6,000
Periodic System
Purchases
6,000
Accounts Payable
6,000
5 . PA I D P 2 0 0 F R E I G H T O N T H E
P6,000 PURCHASE; TERMS WERE
F O B S H I P P I N G P O I N T, F R E I G H T
C O L L E C T:
Perpetual System
Inventory
Cash
200
200
Periodic System
Transportation In
Cash
200
200
6. RETURNED MERCHANDISE
C O S T I N G P 3 0 0 ( PA R T O F P 6 , 0 0 0
PURCHASE #4):
Perpetual System
Accounts Payable
300
Inventory
Periodic System
Accounts Payable
300
300
Purchase Returns & Allowances
300
7 . PA I D F O R M E R C H A N D I S E
PURCHASED, REFER TO #4 {CASH
D I S C O U N T TA K E N : ( P 6 , 0 0 0
PURCHASE – P300 RETURN) X 2%
D I S C O U N T = P 11 4 ] :
Perpetual System
Accounts Payable 5,700
Inventory
Cash
114
5,586
Periodic System
Accounts Payable 5,700
Purchase Discounts
Cash
114
5,586
A S S U M E T H AT A P H Y S I C A L C O U N T
REVEALED INVENTORY ON HAND OF
1 0 5 U N I T S C O S T I N G P 4 0 P E R U N I T.
GROSS PROFIT
• Also known as gross income, gross margin or sales profit
• Represents the profit a business earns after deducting the cost of goods sold or services
rendered, but before deducting other expenses.
Net Sales
Pxx
Less: Cost of Goods Sold (xx)
Gross Profit
Pxx
NET PROFIT
• Different from gross profit
• It is the amount derived after deducting all other expenses from the gross profit
Net sales (see next slide for formula)
Pxx
Less: Cost of Goods Sold
(xx)
Gross profit
Xx
Rent expense
(xx)
Depreciation expense
(xx)
Salaries expense, etc
(xx)
Profit (net profit)
Pxx
C O M P U TAT I O N O F N E T S A L E S
Sales
Pxx
Less: Sales returns
(xx)
Less: Sales discounts
(xx)
Net sales
Pxx
I N V O LV E D A C C O U N T S I N N E T
S A L E S C O M P U TAT I O N
• Sales – includes both cash sales and credit sales
• Sales returns – the account used to record goods
returned by customers
• Sales discounts – the account used to record cash
discounts
CLOSING ENTRIES
• Only nominal accounts are closed because it needs to
be “zeroed out”.
• Nominal accounts are accounts found in the Income
Statement
REQUIRED CLOSING ENTRIES
• Close the Net Sales to Income Summary
Sales
Sales Returns and Allowances
Sales Discount
Income Summary
REQUIRED CLOSING ENTRIES
• Close the expenses to income summary account
Income Summary
Salary Expense
Utilities Expense
Depreciation Expense
Other Expenses
REQUIRED CLOSING ENTRIES
• Close the income summary account to Capital
Income Summary
UB, Capital
REQUIRED CLOSING ENTRIES
• Close the Drawings account to Capital Account
UB, Capital
UB, Drawings
THANK YOU!
• Let’s answer guided exercises!