FUNDAMENTALS OF ABM 2
Module 3: Accounting for Merchandising Business (Part 2)
Module Summary
Perpetual Inventory System – inventory data is updated per merchandise transaction (e.g., purchase of goods from
a supplier, sale of goods to customers)
3.1. MERCHANDISE TRANSACTIONS UNDER THE PERPETUAL INVENTORY SYSTEM
● This summary compares pro-forma entries with the ones used in the Periodic Inventory System.
PERPETUAL INVENTORY SYSTEM
Purchase
Transaction
(with freight costs)
Merchandise Inventory
Cash (or A/P)
XXX + YYY
Purchase
Returns
Cash (or A/P)
Merch. Inventory
A/P
Cash
Merch. Inventory
Cash (or A/R)
Sales Revenue
COGS
Merch. Inventory
Delivery Expense
Cash (or A/P)
SRA
Cash (or A/R)
Merchandise Inventory
COGS
Cash
Sales Discounts
A/R
XXX
Cash Payment
(with discounts
applied)
Sales
Transaction
(with freight costs)
Sales Returns
Cash Collection
(with discounts
applied)
Legend:
PERIODIC INVENTORY SYSTEM
XXX + YYY
XXX
XXX
XXX – ZZZ
ZZZ
XXX
XXX
AAA
AAA
Purchases
Freight-in
Cash (or A/P)
Cash (or A/P)
PRA
A/P
Cash
Purch. Discounts
Cash (or A/R)
Sales Revenue
Freight-out
Cash (or A/P)
XXX
YYY
SRA
Cash (or A/R)
XXX
Cash
Sales Discounts
A/R
XXX – ZZZ
ZZZ
XXX + YYY
XXX
XXX
XXX
XXX – ZZZ
ZZZ
XXX
XXX
YYY
YYY
YYY
YYY
XXX
XXX
XXX
AAA
AAA
XXX – ZZZ
ZZZ
ZZZ
ZZZ
XXX – price of items as bought or sold (for seller, use selling price)
YYY – freight charges
AAA – cost of items (use unit cost)
ZZZ – discount amount
FABM 2 - Module 3 Summary | Page 1 of 1