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About this document
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- 2 pages
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- $2 one-time, yours to keep
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- Format
- Subject
- Accounting, Business
- Module
- Week 4
This document explains the journal entries for recording the purchase and sale of merchandise in a merchandising organization. It compares periodic and perpetual inventory systems, with examples. It is for Week 4.
What's inside
- Journal entries for merchandise purchase and sale
- Periodic vs perpetual inventory systems
- Sale of merchandise on credit
- Return of merchandise sold
- Cash received on account with discount
Who it is for: Students taking an accounting course, probably ACC 290. (Undergraduate)
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Summary
Merchandise purchase and sale transactions are recorded differently depending on the inventory system used. Students learn how to make journal entries for these transactions in both perpetual and periodic systems.
Inventory Systems Explained
Perpetual inventory systems update records continuously. Periodic systems update records only at the end of the period. Both systems record sales and returns differently.
Journal Entries for Sales
Journal entries for sales on credit differ between perpetual and periodic systems. Perpetual systems record cost of goods sold and inventory changes immediately. Periodic systems do not.
Journal Entries for Returns
Returns of merchandise sold also have different journal entries. Perpetual systems adjust inventory and cost of goods sold. Periodic systems do not.
Journal Entries for Discounts
Cash received on account with discounts has the same journal entries in both systems. Both systems record sales discounts and accounts receivable.
Key terms
- Perpetual inventory system
- A system that updates inventory records continuously.
- Periodic inventory system
- A system that updates inventory records only at the end of the period.
- Journal entries
- Records of financial transactions in accounting.
- Cost of goods sold
- The direct costs attributable to the production of the goods sold by a company.
- Accounts receivable
- The balance of money due to a firm for goods or services delivered or used but not yet paid for by customers.
- Sales returns and allowances
- A contra-revenue account that records the reduction in sales due to returns or allowances.
Questions this document helps with
- What are the differences between perpetual and periodic inventory systems?
- How do you record a sale of merchandise on credit?
- What journal entries are made for a return of merchandise sold?
Summary written with AI from the document's text.
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