JOURNAL ENTRIES – PERIODIC INVENTORY SYSTEM:
SELLER’S BOOK
BUYER'S BOOK
Sales:
1. Merchandise sold for cash
Purchases:
1. Merchandise is purchased/acquired for cash
On March 1, Dixie Trading sold merchandise for P500
cash to Pearl Enterprise.
Cash
Sales
500
500
2. Merchandise sold on account
Purchases
Cash
500
500
2. Merchandise is purchased/acquired on account
On March 3, Dixie Trading sold merchandise to Pearl
Enterprise for P2,000 on account.
Accounts Receivable
Sales
On March 1, Pearl Enterprise purchased merchandise
for P500 cash to Dixie Trading.
2,000
2,000
On March 3, Pearl Enterprise purchased merchandise to
Dixie Trading for P2,000 on account.
Purchases
Accounts Payable
2,000
2,000
3. Merchandise sold with down payment on the date
of sale and the balance on account.
3. Merchandise is purchased with a down payment
given at the date of purchased and the balance on
account.
On March 11, Dixie Trading sold merchandise to Pearl
Enterprise for P15,000. A down payment of P5,000
was received and the balance placed on account.
On March 11, Pearl Enterprise purchased merchandise to
Dixie Trading for P15,000. A down payment of P5,000 was
paid and the balance placed on account.
Cash
Accounts Receivable
Sales
5,000
10,000
15,000
Purchases
15,000
Cash
Accounts Payable
5,000
10,000
Sale of merchandise with Trade Discount given:
Purchase merchandise with Trade Discount:
Dixie Trading sold to Pearl Enterprise 1,000 boxes of soap.
The catalog or list price was P700 per box, with a 10%
trade discount for orders of 201 to 500 boxes plus an
additional 10% trade discount for orders of 501 to 1,000
boxes.
Pearl Enterprise purchased to Dixie Trading 1,000 boxes of
soap. The catalog or list price was P700 per box, with a
10% trade discount for orders of 201 to 500 boxes plus an
additional 10% trade discount for orders of 501 to 1,000
boxes.
List price (1,000 cases x P700)
P 700,000
Less: 1st Trade Discount (P700,000 x 10%)
70,000
st
Net amount after 1 Trade Discount
P 630,000
Less: 2nd Trade Discount (P630,000 x 10%)
63,000
Sales Price
P 567,000
*other computation (P700,000 x 90% x 90%) = P567,000
Cash
567,000
Sales
567,000
*the assumption is cash sales if it’s on account the debit
account would be Accounts Receivable
Purchases
Cash
567,000
567,000
*the assumption is purchased for cash, if it’s on account
the credit account would be Accounts Payable
Sales Return and Allowances:
Purchase Return and Allowances:
1. Dixie Trading accepted the returns of damaged
merchandise from a customer. Issued a credit memo for
P500 to the customer.
1. Pearl Enterprise returned damaged merchandised to its
supplier. Received a credit memo from supplier for P500.
Sales Return and Allowances
Accounts Receivable
500
Accounts Payable
500
Purchase Returns and Allowances
500
2. A customer refunded P200 cash for return of damaged
merchandise.
Sales Return and Allowances
Cash
200
2. A cash refund was received for merchandise returned to
supplier, P200.
Cash
200
500
200
Purchase Returns and Allowances
200
Sales Discounts:
Purchase Discounts:
Transactions:
May 01 Sold Merchandise to Pearl Enterprise, P2,000 on
terms of 2/10,n/30.
May 03 Issued a credit memo for damaged merchandise
returned by Pearl Enterprise,P100
May 11 Received check from Pearl Enterprise in full
payment of their account.
Transactions:
May 01 Purchased Merchandise to Dixie Trading, P2,000
on terms of 2/10,n/30.
May 03 Received a credit memo for damaged
merchandise from Dixie Trading, P100
May 11 Paid check to Dixie Trading in full payment of its
account.
May 1 Accounts Receivable
Sales
May 3 Sales Return and Allowances
Accounts Receivable
May 11 Cash
Sales Discounts
Accounts Receivable
2,000
2,000
100
100
1,862
38
1,900
*please take note that Sales Discount is based on Net Sales (Sales less
Sales Returns and Allowances in the above example Net Sales is
P1,900).
*in the above example that payment is within the discount period of 10
days. If the payment will be beyond May 11 or 10 days. No discount will
be given and the entry will be debit Cash 1,900 and credit Accounts
Receivable 1,900
May 1 Purchases
Accounts Payable
2,000
2,000
May 3 Accounts Payable
100
Purchase Return and Allowances
100
May 11 Accounts Payable
Cash
Purchase Discounts
1,900
1,862
38
*please take note that Sales Discount is based on Net Sales (Sales less
Sales Returns and Allowances in the above example, P1,900)
*in the above example that payment is within the discount period of 10
days. If the payment will be beyond May 11 or 10 days. No discount will
be given and the entry will be debit Accounts Payable 1,900 and credit
Cash 1,900
Freight out or Delivery Expenses or Transportation-out
Freight-in or Delivery-in or Transportation-in
On January 10, Dixie Trading located in Los Banos sold
merchandise worth P100,000 from Pearl Enterprise
located in Batangas with terms 2/10,n/30. Freight or
transportation cost amounted to P10,000 was paid on
January 14 based on below assumptions. On January 20
Pearl Enterprise paid in full.
On January 10, Pearl Enterprise located in Batangas
purchased merchandise worth P100,000 from Dixie
Trading located in Los Banos with terms 2/10,n/30. Freight
or transportation cost amounted to P10,000 was paid on
January 14 based on below assumptions. On January 20
Pearl Enterprise paid in full.
Assume the following shipping terms:
Assume the following shipping terms:
a. FOB shipping point, freight collect
Jan 10 Accounts Receivable
Sales
a. FOB shipping point, freight collect
100,000
100,000
Jan 14 No Entry
98,000
2,000
100,000
b. FOB shipping point, freight prepaid
Jan 10 Accounts Receivable
Sales
100,000
Jan 14 Accounts Receivable
Cash
10,000
Jan 20 Cash
Sales Discounts
Accounts Receivable
108,000
2,000
100,000
10,000
10,000
Jan 20 Accounts Payable
100,000
Cash
98,000
Purchase Discounts
2,000
b. FOB shipping point, freight prepaid
100,000
100,000
Jan 10 Purchases
Accounts Payable
10,000
10,000
Jan 14 Freight-in
Accounts Payable
110,000
Jan 20 Accounts Payable
Cash
Purchase Discounts
c. FOB Destination, freight prepaid
100,000
10,000
110,000
108,000
2,000
c. FOB Destination, freight prepaid
100,000
100,000
Jan 14 Freight-out
Cash
10,000
Jan 20 Cash
Sales Discounts
Accounts Receivable
98,000
2,000
Jan 10 Purchases
Accounts Payable
100,000
100,000
Jan 14 No entry
10,000
100,000
d. FOB Destination, freight collect
Jan 10 Accounts Receivable
Sales
100,000
Jan 14 Freight-in
Cash
Jan 20 Cash
Sales Discounts
Accounts Receivable
Jan 10 Accounts Receivable
Sales
Jan 10 Purchases
Accounts Payable
Jan 20 Accounts Payable
Cash
Purchase Discounts
100,000
98,000
2,000
d. FOB Destination, freight collect
100,000
100,000
Jan 14 Freight-out
Accounts Receivable
10,000
Jan 20 Cash
Sales Discounts
Accounts Receivable
88,000
2,000
Jan 10 Purchases
Accounts Payable
100,000
100,000
Jan 14 Accounts Payable
Cash
10,000
10,000
90,000
90,000
Jan 20 Accounts Payable
Cash
Purchase Discounts
*Freight-out account is used to record shipping cost
shouldered by the seller for sales of merchandise to
customers. Another term is Delivery Expense or
Transportation-out which is shown on the Selling Expense
section of the Income Statement.
10,000
88,000
2,000
*Freight-in account is used to record freight cost incurred
by the buyer in acquiring merchandise. It is shown in the
Cost of Goods Sold section of the Income Statement. It’s
added to purchases. It is called adjunct account.