NATURE OF TRANSACTIONS IN A MERCHANDISING BUSINESS Q2 W3

MERCHANDISING

-Is a business activity of buying and selling goods.

-The goods that a merchandising company sells to its customers are

called as Merchandise Inventory or Inventory.

MERCHANDISING OPERATING CYCLE

MERCHANDISING FIRM EQUATIONS

PERIODIC INVENTORY METHOD

 Accounts Lopez,
101 Cash 201 Payable 301 Capital 401 Sales 501 Purchase
Purchase
Accounts Notes Lopez, Sales Return and
102 Receivable 202 Payable 302 Drawing 402 Dicounts 502 Allowances
Sales Return
Office Income and Purchase
103 Supplies 330 Summary 420 Allowances 503 Discounts
130 Inventory 504 Freight In
Computer
104 Equipment
Salaries
601 Expense
602 Freight Out
Advertising
603 Expense
Utilities
604 Expense
605 Rent Expense

Journalize the following transactions:

Lourd Brothers Trading Company’s transactions for March 2020 were as
follows:
1 The business registered as a single proprietorship and Jaynielle Lopez invested P40,000
2 Bought computer equipment for P10,000 cash
Bought merchandise on account from Andrew Supplies Company, P15,900 with terms: 2/10, n/30
3 Bought office supplies for P700
4 Sold merchandise on account to LB Leverage Company P15,200 FOB
Destination, terms: 2/10, n/30.Ref. SI#0001
5 Paid P200 freight for March 4 sale
6 Received credit memo from Andrew Supplies Company for merchandise return, P300
11 Paid Andrew Supply Company
13 Collected from LB Leverage Company
14 Bought merchandise from E Perol Enterprises, P13,400
15 Paid salaries of P1,500
16 Borrowed money from CIM Bank, signed a promissory note for P12,000
17 Received refund from a supplier on cash purchase on March 14, P500
18 Bought merchandise from Mia Lovella Distributors, P14,200 FOB Shipping point , terms: 2/10, n/30
20 Paid freight on March 18 purchase, P700
23 Sold merchandise to Foggia’s Merchandise for P16,400.
26 Bought merchandise from My Souki, P12,300
27 Paid Mia Lovella Distributors on March 18 purchase, P9,000 No allowed discount on partial
payment
28 Jaynielle Lopez withdrew cash from the business, P2,008
29 Made refund to Foggia’s Merchandise for a defective merchandise, P900
30 Sold Merchandise to Collete’s Creations, P13,700, with terms 2/10,
n/30.Ref. SI#0002
Paid the following: Advertising P1,000, Utilities, P400, Rent P3,500,
Salaries P1,500
Inventory Count at the end of the month is P35,000.00

GENERAL JOURNAL
Date Particulars Ref. Debit Credit
2020
March 1 Cash P40,000.00
Lopez, Capital P40,000.00
(To record initial investment)

2 Computer Equipment 10,000.00

Cash 10,000.00
(To record purchase of equipment)

Purchases 15,900.00
Accounts Payable 15,900.00
(To record purchase of merchandise on account)

3 Office Supplies 700.00

Cash 700.00
(To record purchase of supplies)

4 Accounts Receivable 15,200.00

Sales 15,200.00
 (To record sold merchandise to customers)

5 Freight Out 200.00

Cash 200.00
(To record payment of freight)

6 Accounts Payable 300.00

Purchase Returns and Allowances 300.00
(To record return of merchandise to supplier)

11 Accounts Payable 15,600.00

Cash 15,288.00
Purchase Discount 312.00
(To record payment of merchandise)

13 Cash 14,896.00
Sales Discount 304.00
Accounts Receivable 15,200.00
(To record collection from customer)

14 Purchases 13,400.00
Cash 13,400.00
(To record purchase of merchandise)

15 Salaries Expense 1,500.00

Cash 1,500.00
(To record payment of Salary)

16 Cash 12,000.00
Notes Payable 12,000.00
(To record borrowed money from the bank)

17 Cash 500.00
Purchase Returns & Allowances 500.00
(To record returned foods to supplier)

18 Purchases 14,200.00
Accounts Payable 14,200.00
(To record purchase of goods on account)

20 Freight In 700.00
 Cash 700.00
(To record payment of freight)

23 Cash 16,400.00
Sales 16,400.00
(To record sold goods to customer)

26 Purchases 12,300.00
Cash 12,300.00
(To record purchase of goods)

27 Accounts Payable 9,000.00

Cash 9,000.00
(To record partial payment of merchandise bought)

28 Lopez, Drawing 2,008.00

Cash 2,008.00
(To record withdrawal of capital)

29 Sales Returns and Allowances 900.00

Cash 900.00
(To record return of goods from Foggia's Merchandise)

30 Accounts Receivable 13,700.00

Sales 13,700.00
(To record sale of merchandise)

Advertising Expense 1,000.00

Utilities Expense 400.00
Rent Expense 3,500.00
Salaries Expense 1,500.00
Cash 6,400.00
(To record payment of expenses) CC

GENERAL LEDGER
Account Account
Title: Cash Code: 101
Date Explanation Ref Debit Credit Balance
1/3/2020 To record initial investment 40,000.00 40,000.00
2/3/2020 To record purchase of equipment 10,000.00 30,000.00
3/3/2020 To record purchase of supplies 700.00 29,300.00
 5/3/2020 To record payment of freight 200.00 29,100.00
29,100.00
11/3/2020 To record payment of merchandise 15,288.00 13,812.00
13/3/2020 To record collection from customer 14,896.00 28,708.00
14/3/2020 To record purchase of merchandise 13,400.00 15,308.00
15/3/2020 To record payment of Salary 1,500.00 13,808.00
16/3/2020 To record borrowed money from the bank 12,000.00 25,808.00
17/3/2020 To record returned foods to supplier 500.00 26,308.00
20/3/2020 To record payment of freight 700.00 25,608.00
23/3/2020 To record sold goods to customer 16,400.00 42,008.00
26/3/2020 To record purchase of goods 12,300.00 29,708.00
To record partial payment of merchandise
27/3/2020 bought 9,000.00 20,708.00
28/3/2020 To record withdrawal of capital 2,008.00 18,700.00
To record return of goods from Foggia's
29/3/2020 Merchandise 900.00 17,800.00
30/3/2020 To record payment of expenses 6,400.00 11,400.00
GRAND TOTAL 83,796.00 72,396.00 11,400.00

GENERAL LEDGER
Account
Title: Accounts Receivable Account Code: 102
Date Explanation Ref Debit Credit Balance
4/3/2020 To record sold merchandise to customers 15,200.00 15,200.00
13/3/2020 To record collection from customer 15,200.00 -
GRAND TOTAL 15,200.00 15,200.00 -

GENERAL LEDGER
Account Title: Office Supplies Account Code: 420
Date Explanation Ref Debit Credit Balance
3/3/2020 To record purchase of supplies 700.00 700.00
30/3/2020 To record sale of merchandise 13,700.00 14,400.00
14,400.00
14,400.00
GRAND TOTAL 14,400.00 - 14,400.00

GENERAL LEDGER
Account Account
Title: Inventory Code: 130
Date Explanation Ref Debit Credit Balance

GRAND TOTAL - - -
GENERAL LEDGER
Account Account
Title: Computer Equipment Code: 104
Date Explanation Ref Debit Credit Balance
To record purchase of
2/3/2020 equipment 10,000.00 10,000.00
GRAND TOTAL 10,000.00 - 10,000.00

GENERAL LEDGER
Account
Title: Accounts Payable Account Code: 201
Date Explanation Ref Debit Credit Balance
To record purchase of merchandise on
2/3/2020 account 15,900.00 15,900.00
6/3/2020 To record return of merchandise to supplier 300.00 15,600.00
11/3/2020 To record payment of merchandise 15,600.00 -
18/3/2020 To record purchase of goods on account 14,200.00 14,200.00
To record partial payment of merchandise
27/3/2020 bought 9,000.00 5,200.00
GRAND TOTAL 24,900.00 30,100.00 5,200.00

GENERAL LEDGER
Account Account
Title: Notes Payable Code: 202

Date Explanation Ref Debit Credit Balance

To record borrowed money from the
16/3/2020 bank 12,000.00 12,000.00

GRAND TOTAL - 12,000.00 12,000.00

GENERAL LEDGER
Account Account
Title: Lopez, Capital Code: 301

Date Explanation Ref Debit Credit Balance

To record initial
1/3/2020 investment 40,000.00 40,000.00

GRAND TOTAL - 40,000.00 40,000.00

GENERAL LEDGER
Account Title: Lopez, Drawing Account Code: 302
Date Explanation Ref Debit Credit Balance
To record withdrawal of
28/3/2020 capital 2,008.00 2,008.00
2,008.0
GRAND TOTAL 0 - 2,008.00

GENERAL LEDGER
Account Account
Title: Sales Code: 401
Date Explanation Ref Debit Credit Balance
4/3/2020 To record sold merchandise to customers 15,200.00 15,200.00
23/3/2020 To record sold goods to customer 16,400.00 31,600.00
30/3/2020 To record sale of merchandise 13,700.00 45,300.00
GRAND TOTAL - 45,300.00 45,300.00

GENERAL LEDGER
Account Account
Title: Sales Discounts Code: 402
Re
Date Explanation f Debit Credit Balance
13/3/2020 To record collection from customer 304.00 304.00
GRAND TOTAL 304.00 - 304.00

GENERAL LEDGER
Account Account
Title: Sales Return and Allowances Code: 420
Date Explanation Ref Debit Credit Balance
To record return of goods from Foggia's
29/3/2020 Merchandise 900.00 900.00
GRAND TOTAL 900.00 - 900.00

GENERAL LEDGER
Account Account
Title: Purchases Code: 501
Date Explanation Ref Debit Credit Balance
To record purchase of merchandise on
2/3/2020 account 15,900.00 15,900.00
14/3/2020 To record purchase of merchandise 13,400.00 29,300.00
 18/3/2020 To record purchase of goods on account 14,200.00 43,500.00
26/3/2020 To record purchase of goods 12,300.00 55,800.00
GRAND TOTAL 55,800.00 - 55,800.00

GENERAL LEDGER
Account
Title: Purchase Discount Account Code: 502
Date Explanation Ref Debit Credit Balance
11/3/2020 To record payment of merchandise 312.00 312.00
GRAND TOTAL - 312.00 312.00

GENERAL LEDGER
Account
Title: Purchase Return and Allowances Account Code: 502
Date Explanation Ref Debit Credit Balance
17/3/2020 To record returned foods to supplier 500.00 500.00
6/3/2020 To record return of merchandise to supplier 300.00 800.00
GRAND TOTAL - 800.00 800.00

GENERAL LEDGER
Account Title: Freight In Account Code: 504
Re
Date Explanation f Debit Credit Balance
20/3/2020 To record payment of freight 700.00 700.00
GRAND TOTAL 700.00 - 700.00

GENERAL LEDGER
Account
Account Title: Salaries Expense Code: 601
Date Explanation Ref Debit Credit Balance
15/3/2020 To record payment of Salary 1,500.00 1,500.00
To record payment of
30/3/2020 expenses 1,500.00 3,000.00
GRAND TOTAL 3,000.00 - 3,000.00

GENERAL LEDGER
Account
Account Title: Freight Out Code: 602
Date Explanation Ref Debit Credit Balance
5/3/2020 To record payment of freight 200.00 200.00
 GRAND TOTAL 200.00 - 200.00

GENERAL LEDGER
Account
Account Title: Advertising Expense Code: 603
Date Explanation Ref Debit Credit Balance
To record payment of
30/3/2020 expenses 1,000.00 1,000.00
GRAND TOTAL 1,000.00 - 1,000.00

GENERAL LEDGER
Account
Account Title: Utilities Expense Code: 604
Date Explanation Ref Debit Credit Balance
To record payment of
30/3/2020 expenses 400.00 400.00
GRAND TOTAL 400.00 - 400.00

GENERAL LEDGER
Account
Account Title: Rent Expense Code: 605
Date Explanation Ref Debit Credit Balance
To record payment of
30/3/2020 expenses 3,500.00 3,500.00
GRAND TOTAL 3,500.00 - 3,500.00

COST OF GOODS SOLD

NET INCOME