Chapter 4 – Accounting for Merchandising Businesses
Chapter 4 – Accounting for Merchandising Businesses
Exercises 1 :
Sales Transaction
Cash Sales
 On January 3, Alsaud
sold 1000 RS
of merchandise for cash. The cost of
merchandise sold was 200 RS
Date
Jan. 3
Description
Debit
Credit
Jan. 3
Sales on Account
 On January 12, Alsaud
sold merchandise on account for 5000 RS . The cost of
merchandise sold was 2000 RS .
Date
Jan. 12
Description
Debit
Credit
Jan. 12
Receipts on Account
 On January 17, Alsaud
deducted (………… )
Date
Jan. 22
Description
Credit Memo
receives the amount due within ten days, so the buyer
(15000 x 3 %) from the invoice amount.
Debit
Credit
Chapter 4 – Accounting for Merchandising Businesses
 A credit memorandum, often called a creditmemo, authorizes a credit to (decreases) the
buyer’s account receivable.
 On January 13, issued Credit Memo No. 32 to Krier Company for merchandise
returned to Alsaud . Selling price, 5000 RS ; cost to Alsaud , 1500 RS .
Date
Jan. 13
Description
Debit
Credit
Jan. 13
Purchase Transactions
 On January 3, Alsaud s purchased merchandise for cash. 2500 Rs
 On January 4, Alsaud
purchased merchandise on account from Thomas Corporation
5000 RS
Date
Jan. 3
Description
Debit
Credit
Jan. 4
2-Purchases Discounts
 ALsaad
issues an invoice for 3000 RS
5/10, n/30. Alsaud
to Alsaud
dated March 12, with terms
is trying to determine if it should pay the invoice within the
discount period.
 Based on the calculation in the previous slide, Alsaud pays the amount due, less the
discount, on March 22.
Date
Mar. 12
Description
Debit
Credit
Chapter 4 – Accounting for Merchandising Businesses
Mar. 22
Purchases Returns and Allowances
 A debit memorandum, often called a debit memo, informs the seller of the amount
the buyer proposes to debit to the account payable due the seller.
Debit Memo
 NetSolutions receives a delivery from Maxim Systems and determines that $900 of
the items are not the merchandise ordered. Debit memorandum #18 is issued to
Maxim Systems. NetSolutions records the return of the merchandise as follows:
Date
Mar. 7
Description
Debit
Credit
Merchandise Purchased
 On May 2, Alsaud purchased 5000 RS of merchandise on account from Delta Data
Link, terms 2/10, n/30.
 On May 4 ,Alsaud returned 3000 Rs of the merchandise purchased from Delta Data
Link.
Date
May. 2
Description
Debit
May. 4
Exercises 2 :
Complete the following table :
Gross profit
- Total operating expenses
= Income from operations
50000
15000
Credit
Chapter 4 – Accounting for Merchandising Businesses
- Other expenses and losses
5000
= Net income
Exercises 3 :
1. On March 18, Diamond Store sold $25,000 of merchandise on account. The
merchandise was carried in inventory at a cost of $18,000.
2. On June 8, Diamond. sold merchandise costing $3,500 for $6,000 on account. Credit
terms were 2/10, n/30. Let’s prepare the journal entries.
3. On June 17, Diamond Store . received a check for $5,880 in full payment of the June
8 sale
4. On June 14, merchandise with a sales price of $800 and a cost of $470 was returned
to Diamond Store . The return is related to the June 12 sale
Date
Description
Debit
Credit
Chapter 4 – Accounting for Merchandising Businesses
Exercise 4:
Barton Company
Income Statement
For Year Ended December 31, 2009
Sales
Less: Sales discounts
Sales returns
Net sales
Cost of Goods Sold
Gross profit from sales
Operating expenses:
Selling expenses:
Salaries expense
$ 29,600
Advertising expense
13,300
General and administrative expenses:
Adm. salaries expense
$ 18,200
Insurance expense
1,200
Rent expense
8,100
Supplies expense
1,000
Total operating expenses
Net income
$ 323,800
$
4,300
2,000
6,300
233,200