Chapter 4 – Accounting for Merchandising Businesses
Analyze Merchandising
transactions
Cash
On Account
1
Discount
Return
Chapter 4 – Accounting for Merchandising Businesses
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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
receives the amount due within ten days, so the buyer
(15000 x 3 %) from the invoice amount.
Description
Debit
Credit
Credit Memo
 A credit memorandum, often called a creditmemo, authorizes a credit to (decreases) the
buyer’s account receivable.
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Chapter 4 – Accounting for Merchandising Businesses
 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
Jan. 13
Exercises 2 :
Complete the following table :
Gross profit
50000
- Total operating expenses
15000
= Income from operations
- Other expenses and losses
5000
= Net income
4
Credit
Chapter 4 – Accounting for Merchandising Businesses
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
5
Debit
Credit
Chapter 4 – Accounting for Merchandising Businesses
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