id stringlengths 36 36 | embedding list | document stringlengths 70 999 | metadata stringlengths 691 694 |
|---|---|---|---|
bcc7b0d5-1e8d-4911-a410-41cdeba5f8aa | [
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-0.0... | retailer offer this? Wouldn’t they rather receive the entire amount owed? The discount serves several purposes
that are similar to the rationale manufacturers consider when offering discounts to retailers. It can help
solidify a long-term relationship with the customer, encourage the customer to purchase more, and decreases
the time it takes for the company to see a liquid asset (cash). Cash can be used for other purposes
immediately such as reinvesting in the business, paying down loans quicker, and distributing dividends to
shareholders. This can help grow the business at a more rapid rate.
Similar to credit terms between a retailer and a manufacturer, a customer could see credit terms offered by
the retailer in the form of 2/10, n/30. This particular example shows that if a customer pays their account
within 10 days, they will receive a 2% discount. Otherwise, they have 30 days to pay in full but do not receive a | {"uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "creationdate": "2019-04-24T10:32:54-05:00", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "total_pages": 1055, "file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00"} |
e4c11946-0662-4828-a4a0-dd79e2149921 | [
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-0.0065771592780947685,
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-0.... | within 10 days, they will receive a 2% discount. Otherwise, they have 30 days to pay in full but do not receive a
discount. If the customer does not pay within the discount window, but pays within 30 days, the retailing
company records a credit to Accounts Receivable, and a debit to Cash for the full amount stated on the invoice.
If the customer is able to pay the account within the discount window, the company records a credit to
Accounts Receivable, a debit to Cash, and a debit to Sales Discounts.
The sales discounts account is a contra revenue account that is deducted from gross sales at the end of a
period in the calculation of net sales. Sales Discounts has a normal debit balance, which offsets Sales that has
a normal credit balance.
Let’s assume that a customer purchased 10 emergency kits from a retailer at $100 per kit on credit. The
retailer offered the customer 2/10, n/30 terms, and the customer paid within the discount window. The retailer | {"creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "file_type": ".pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader", "producer": "Prince 11 (www.princexml.com)"} |
84aa7388-69b5-4f6d-8a07-909dfb64e691 | [
-0.07106766849756241,
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-0.066... | retailer offered the customer 2/10, n/30 terms, and the customer paid within the discount window. The retailer
recorded the following entry for the initial sale.
Since the retail doesn’t know at the point of sale whether or not the customer will qualify for the sales
discount, the entire account receivable of $1,000 is recorded on the retailer’s journal.
Also assume that the retail’s costs of goods sold in this example were $560 and we are using the perpetual
inventory method. The journal entry to record the sale of the inventory follows the entry for the sale to the
customer.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
375
Since the customer paid the account in full within the discount qualification period of ten days, the following
journal entry on the retailer’s books reflects the payment. | {"upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "moddate": "2020-08-05T15:26:11-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "file_name": "FinancialAccounting-OP.pdf"} |
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0.07438509911298752,
-0.045... | 375
Since the customer paid the account in full within the discount qualification period of ten days, the following
journal entry on the retailer’s books reflects the payment.
Now, assume that the customer paid the retailer within the 30-day period but did not qualify for the discount.
The following entry reflects the payment without the discount.
Please note that the entire $1,000 account receivable created is eliminated under both payment options. When
the discount is missed, the retail received the entire $1,000. However, when the discount was received by the
customer, the retailer received $980, and the remaining $20 is recorded in the sales discount account.
E T H I C A L C O N S I D E R A T I O N S
Ethical Discounts
Should employees or companies provide discounts to employees of other organizations? An
accountant’s employing organization usually has a code of ethics or conduct that addresses policies for | {"uploaded_via": "batch_uploader", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "title": "Principles of Accounting, Volume 1: Financial Accounting", "moddate": "2020-08-05T15:26:11-05:00", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529"} |
234164fc-f711-4590-b9d8-74d1e41397e0 | [
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0.001633350970223546,
0.1435806006193161,
0.02901882864534855,
-0.02908032014966011,
0.00349... | Should employees or companies provide discounts to employees of other organizations? An
accountant’s employing organization usually has a code of ethics or conduct that addresses policies for
employee discounts. While many companies offer their employees discounts as a benefit, some
companies also offer discounts or free products to non-employees who work for governmental
organizations. Accountants may need to work in situations where other entities’ codes of ethics/conduct
do not permit employees to accept discounts or free merchandise. What should the accountant’s
company do when an outside organization’s code of ethics and conduct does not permit its employees to
accept discounts or free merchandise?
The long-term benefits of discounts are contrasted with organizational codes of ethics and conduct that | {"moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "batch_upload": true, "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_name": "FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
8284f8be-fc26-478d-9637-83915f233dba | [
-0.07551973313093185,
0.08962847292423248,
-0.032555244863033295,
-0.049387842416763306,
0.05981556326150894,
0.020343497395515442,
0.0037892849650233984,
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0.010381003841757774,
0.14437703788280487,
0.006887912750244141,
0.002014335710555315,
0.0... | accept discounts or free merchandise?
The long-term benefits of discounts are contrasted with organizational codes of ethics and conduct that
limit others from accepting discounts from your organization. The International Association of Chiefs of
Police’s Law Enforcement Code of Ethics limits the ability of police officers to accept discounts.[2] These
376
Chapter 6 Merchandising Transactions
discounts may be as simple as a free cup of coffee, other gifts, rewards points, and hospitality points or
discounts for employees or family members of the governmental organization’s employees. Providing
discounts may create ethical dilemmas. The ethical dilemma may not arise from the accountant’s
employer, but from the employer of the person outside the organization receiving the discount.
The World Customs Organization’s Model Code of Ethics and Conduct states that “customs employees are | {"creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "moddate": "2020-08-05T15:26:11-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "batch_upload": true, "upload_timestamp": "2026-02-07T07:23:08.167529", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7} |
fee35c2d-3f45-4b23-992b-ad4e7d7c8725 | [
-0.06646956503391266,
0.10914012044668198,
-0.05474160239100456,
-0.08006834983825684,
-0.007957512512803078,
-0.01905432902276516,
0.06383559107780457,
-0.024309249594807625,
-0.0016341268783435225,
-0.021060487255454063,
0.11707081645727158,
-0.059063225984573364,
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... | employer, but from the employer of the person outside the organization receiving the discount.
The World Customs Organization’s Model Code of Ethics and Conduct states that “customs employees are
called upon to use their best judgment to avoid situations of real or perceived conflict. In doing so, they
should consider the following criteria on gifts, hospitality and other benefits, bearing in mind the full
context of this Code. Public servants shall not accept or solicit any gifts, hospitality or other benefits that
may have a real or apparent influence on their objectivity in carrying out their official duties or that may
place them under obligation to the donor.”[3]
At issue is that the employee of the outside organization is placed in a conflict between their personal
interests and the interest of their employer. The accountant’s employer’s discount has created this
conflict. In these situations, it is best for the accountant’s employer to respect the other organization’s | {"total_pages": 1055, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00"} |
68410064-8a74-4884-9ea0-a300f6ec8e94 | [
-0.09142747521400452,
0.05322207137942314,
-0.004159004893153906,
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-0.08209259808063507,
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0.030643824487924576,
0.01227701548486948,
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-0.014467941597104073,
0.09385380893945694,
0.014674304984509945,
0.023686211556196213,
-0.03... | conflict. In these situations, it is best for the accountant’s employer to respect the other organization’s
code of conduct. As well, it might be illegal for the accountant’s employer to provide discounts to a
governmental organization’s employees. The professional accountant should always be aware of the
discount policy of any outside company prior to providing discounts to the employees of other
companies or organizations.
Sales Returns and Allowances
If a customer purchases merchandise and is dissatisfied with their purchase, they may receive a refund or a
partial refund, depending on the situation. When the customer returns merchandise and receives a full refund,
it is considered a sales return. When the customer keeps the defective merchandise and is given a partial
refund, it is considered a sales allowance. The biggest difference is that a customer returns merchandise in a
sales return and keeps the merchandise in a sales allowance. | {"batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "file_type": ".pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "file_name": "FinancialAccounting-OP.pdf"} |
3265b969-9b52-4a16-a8e0-85208b184c01 | [
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0.06779035925865173,
0.005335736088454723,
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... | refund, it is considered a sales allowance. The biggest difference is that a customer returns merchandise in a
sales return and keeps the merchandise in a sales allowance.
When a customer returns the merchandise, a retailer issues a credit memo to acknowledge the change in
contract and reduction to Accounts Receivable, if applicable. The retailer records an entry acknowledging the
return by reducing either Cash or Accounts Receivable and increasing Sales Returns and Allowances. Cash
would decrease if the customer had already paid for the merchandise and cash was thus refunded to the
customer. Accounts Receivable would decrease if the customer had not yet paid on their account. Like Sales
Discounts, the sales returns and allowances account is a contra revenue account with a normal debit balance
that reduces the gross sales figure at the end of the period.
Beyond recording the return, the retailer must also determine if the returned merchandise is in “sellable | {"file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "uploaded_via": "batch_uploader", "producer": "Prince 11 (www.princexml.com)", "moddate": "2020-08-05T15:26:11-05:00", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00"} |
7a7bf01d-88e2-455c-9ce6-adab18d36663 | [
-0.09450490027666092,
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-0.0374784... | that reduces the gross sales figure at the end of the period.
Beyond recording the return, the retailer must also determine if the returned merchandise is in “sellable
condition.” An item is in sellable condition if the merchandise is good enough to warrant a sale to another
customer in the future. If so, the company would record a decrease to Cost of Goods Sold (COGS) and an
increase to Merchandise Inventory to return the merchandise back to the inventory for resale. This is recorded
at the merchandise’s costs of goods sold value. If the merchandise is in sellable condition but will not realize
the original cost of the good, the company must estimate the loss at this time.
International Association of Chiefs of Police (IACP). Law Enforcement Code of Ethics. October, 1957. https://www.theiacp.org/resources/law- | {"file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "producer": "Prince 11 (www.princexml.com)", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting"} |
accf99ff-767f-4c28-ba40-964c5123b039 | [
-0.07925537973642349,
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0.019182395190000534,
0.028349537402391434,
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0.09009917080402374,
0.1619863510131836,
0.0076621100306510925,
0.044523097574710846,
-0.01498... | International Association of Chiefs of Police (IACP). Law Enforcement Code of Ethics. October, 1957. https://www.theiacp.org/resources/law-
2
enforcement-code-of-ethics
3 World Customs Organization. Model Code of Ethics and Conduct. n.d. http://www.wcoomd.org/~/media/wco/public/global/pdf/topics/
integrity/instruments-and-tools/model-code-of-ethics-and-conduct.pdf?la=en
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
377
On the other hand, when the merchandise is returned and is not in sellable condition, the retailer must
estimate the value of the merchandise in its current condition and record a loss. This would increase
Merchandise Inventory for the assessed value of the merchandise in its current state, decrease COGS for the
original expense amount associated with the sale, and increase Loss on Defective Merchandise for the
unsellable merchandise lost value. | {"producer": "Prince 11 (www.princexml.com)", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "batch_upload": true, "file_size_mb": 156.7, "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader", "total_pages": 1055, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
8409f219-5969-4e83-9ab3-73f693ceecc3 | [
-0.09534749388694763,
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0.025563053786754608,
0.07573231309652328,
-0.08641096204519272,
0.08572321385145187,
-0.0591031... | original expense amount associated with the sale, and increase Loss on Defective Merchandise for the
unsellable merchandise lost value.
Let’s say a customer purchases 300 plants on credit from a nursery for $3,000 (with a cost of $1,200). The first
entry reflects the initial sale by the nursery. The second entry reflects the cost of goods sold.
Upon receipt, the customer discovers the plants have been infested with bugs and they send all the plants
back. Assuming that the customer had not yet paid the nursery any of the $3,000 accounts receivable and
assuming that the nursery determines the condition of the returned plants to be sellable, the retailer would
record the following entries.
For another example, let’s say the plant customer was only dissatisfied with 100 of the plants. After speaking
with the nursery, the customer decides to keep 200 of the plants for a partial refund of $1,000. The nursery | {"file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_size_mb": 156.7, "creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader", "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)"} |
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0.08116072416305542,
-0.019608624279499054,
-0.00018490292131900787,
0.03136955946683884,
0.02974083088338375,
0.02544717863202095,
0.014382435008883476,
-0.028422927483916283,
0.02242903970181942,
0.08237988501787186,
-0.05606137216091156,
0.015538791194558144,
-0.08... | with the nursery, the customer decides to keep 200 of the plants for a partial refund of $1,000. The nursery
would record the following entry for sales allowance associated with 100 plants.
378
Chapter 6 Merchandising Transactions
The nursery would also record a corresponding entry for the inventory and the cost of goods sold for the 100
returned plants.
For both the return and the allowance, if the customer had already paid their account in full, Cash would be
affected rather than Accounts Receivable.
There are differing opinions as to whether sales returns and allowances should be in separate accounts.
Separating the accounts would help a retailer distinguish between items that are returned and those that the
customer kept. This can better identify quality control issues, track whether a customer was satisfied with their
purchase, and report how many resources are spent on processing returns. Most companies choose to | {"producer": "Prince 11 (www.princexml.com)", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "uploaded_via": "batch_uploader", "file_name": "FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "creator": "DocBook XSL Stylesheets V1.79.1", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_size_mb": 156.7, "total_pages": 1055} |
19ce2614-b795-4aca-9fc9-d653021ac955 | [
0.0002444319543428719,
0.03161361441016197,
-0.017200492322444916,
-0.011582206934690475,
0.01643064245581627,
0.005285774823278189,
0.03343250975012779,
0.022843681275844574,
0.05004347860813141,
0.015173072926700115,
0.04164035618305206,
0.0005479012615978718,
0.029578346759080887,
-0.04... | purchase, and report how many resources are spent on processing returns. Most companies choose to
combine returns and allowances into one account, but from a manager’s perspective, it may be easier to have
the accounts separated to make current determinations about inventory.
You may have noticed our discussion of credit sales did not include third-party credit card transactions. This is
when a customer pays with a credit or debit card from a third-party, such as Visa, MasterCard, Discover, or
American Express. These entries and discussion are covered in more advanced accounting courses. A more
comprehensive example of merchandising purchase and sale transactions occurs in Calculate Activity-Based
Product Costs (http://cnx.org/content/m68137/latest/) and Compare and Contrast Traditional and Activity-
Based Costing Systems (http://cnx.org/content/m68138/latest/) , applying the perpetual inventory method.
L I N K T O L E A R N I N G | {"file_type": ".pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055, "file_name": "FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
cf1bd90f-1de3-498d-8362-71956a0c7f56 | [
-0.024545958265662193,
0.02717793919146061,
-0.018191184848546982,
0.0008844175608828664,
0.030935106799006462,
-0.01868460327386856,
-0.07877986878156662,
0.014870132319629192,
0.06222756579518318,
0.01765269599854946,
-0.010277331806719303,
0.05372538045048714,
0.05536726489663124,
-0.03... | Based Costing Systems (http://cnx.org/content/m68138/latest/) , applying the perpetual inventory method.
L I N K T O L E A R N I N G
Major retailers must find new ways to manage inventory and reduce operating cycles to stay competitive.
Companies such as Amazon.com Inc., have been able to reduce their operating cycles and increase their
receivable collection rates to a level better than many of their nearest competitors. Check out Stock
Analysis on Net (https://openstax.org/l/50StockAnalyNet) to find out how they do this and to see a
comparison of operating cycles for top retail brands.
6.2 Compare and Contrast Perpetual versus Periodic Inventory Systems
There are two ways in which a company may account for their inventory. They can use a perpetual or periodic
inventory system. Let’s look at the characteristics of these two systems.
Characteristics of the Perpetual and Periodic Inventory Systems | {"creator": "DocBook XSL Stylesheets V1.79.1", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "moddate": "2020-08-05T15:26:11-05:00"} |
773199fb-7a01-4b81-8eaf-23d771ccc356 | [
-0.04016285389661789,
0.00814911350607872,
-0.055704835802316666,
-0.03358190134167671,
-0.024342024698853493,
0.016708891838788986,
-0.0191580131649971,
-0.03103521466255188,
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0.018716050311923027,
0.08639990538358688,
0.02832297794520855,
0.0022749467752873898,
-0.034... | inventory system. Let’s look at the characteristics of these two systems.
Characteristics of the Perpetual and Periodic Inventory Systems
A perpetual inventory system automatically updates and records the inventory account every time a sale, or
purchase of inventory occurs. You can consider this “recording as you go.” The recognition of each sale or
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
379
purchase happens immediately upon sale or purchase.
A periodic inventory system updates and records the inventory account at certain, scheduled times at the
end of an operating cycle. The update and recognition could occur at the end of the month, quarter, and year.
There is a gap between the sale or purchase of inventory and when the inventory activity is recognized.
Generally Accepted Accounting Principles (GAAP) do not state a required inventory system, but the periodic | {"creator": "DocBook XSL Stylesheets V1.79.1", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "total_pages": 1055, "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "uploaded_via": "batch_uploader", "moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting"} |
2b207050-d6cc-4ad2-9015-0f1fbb01fe62 | [
-0.07213359326124191,
0.08649817109107971,
-0.011998000554740429,
-0.06586426496505737,
0.008901860564947128,
0.03928134962916374,
0.06676646322011948,
0.004770962987095118,
0.04491661489009857,
0.05543093755841255,
0.08361660689115524,
-0.04071046784520149,
0.004491867031902075,
0.0193020... | Generally Accepted Accounting Principles (GAAP) do not state a required inventory system, but the periodic
inventory system uses a Purchases account to meet the requirements for recognition under GAAP. IFRS
requirements are very similar. The main difference is that assets are valued at net realizable value and can be
increased or decreased as values change. Under GAAP, once values are reduced they cannot be increased
again.
Figure 6.8
Inventory Systems. (credit: “Untitled” by Marcin Wichary/Flickr, CC BY 2.0)
C O N T I N U I N G A P P L I C A T I O N A T W O R K
Merchandising Transactions
Gearhead Outfitters is a retailer of outdoor-related gear such as clothing, footwear, backpacks, and
camping equipment. Therefore, one of the biggest assets on Gearhead’s balance sheet is inventory. The
proper presentation of inventory in a company’s books leads to a number of accounting challenges, such
as:
• What method of accounting for inventory is appropriate? | {"creator": "DocBook XSL Stylesheets V1.79.1", "title": "Principles of Accounting, Volume 1: Financial Accounting", "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "total_pages": 1055, "file_name": "FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "batch_upload": true} |
47ae6894-fe6a-4433-ac66-c3dcae192bc4 | [
-0.03549717366695404,
0.09758885949850082,
0.002668303670361638,
-0.03557421639561653,
-0.0950007513165474,
0.08181053400039673,
-0.020219702273607254,
0.0655265524983406,
-0.025447126477956772,
0.03637915849685669,
0.045970264822244644,
0.008306125178933144,
0.04801943153142929,
-0.071022... | proper presentation of inventory in a company’s books leads to a number of accounting challenges, such
as:
• What method of accounting for inventory is appropriate?
• How often should inventory be counted?
• How will inventory in the books be valued?
•
•
Is any of the inventory obsolete and, if so, how will it be accounted for?
Is all inventory included in the books?
• Are items included as inventory in the books that should not be?
Proper application of accounting principles is vital to keep accurate books and records. In accounting for
inventory, matching principle, valuation, cutoff, completeness, and cost flow assumptions are all
important. Did Gearhead match the cost of sale with the sale itself? Was only inventory that belonged to
the company as of the period end date included? Did Gearhead count all the inventory? Perhaps some
380
Chapter 6 Merchandising Transactions | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "file_size_mb": 156.7, "creationdate": "2019-04-24T10:32:54-05:00", "batch_upload": true, "creator": "DocBook XSL Stylesheets V1.79.1", "title": "Principles of Accounting, Volume 1: Financial Accounting"} |
98d70f03-ffd5-4e0d-a7ba-7ed2d6753048 | [
-0.022913798689842224,
0.07512323558330536,
0.030568409711122513,
-0.038531117141246796,
-0.03777322173118591,
0.057757869362831116,
-0.0015533677069470286,
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-0.014877173118293285,
0.039962027221918106,
0.05258368328213692,
-0.023783663287758827,
0.06339877098798752,
-0... | the company as of the period end date included? Did Gearhead count all the inventory? Perhaps some
380
Chapter 6 Merchandising Transactions
goods were in transit (on a delivery truck for a sale just made, or en route to Gearhead). What is the
correct cost flow assumption for Gearhead to accurately account for inventory? Should it use a first-in,
first-out method, or last-in, first-out?
These are all accounting challenges Gearhead faces with respect to inventory. As inventory will represent
one of the largest items on the balance sheet, it is vital that Gearhead management take due care with
decisions related to inventory accounting. Keeping in mind considerations such as gross profit, inventory
turnover, meeting demand, point-of-sale systems, and timeliness of accounting information, what other
accounting challenges might arise regarding the company’s inventory accounting processes?
Inventory Systems Comparison | {"source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_name": "FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader", "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055} |
16bb0b68-acb7-49c8-b622-4f4aa3a4e1eb | [
-0.057603102177381516,
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0.03240377828478813,
0.08287215977907181,
-0.03195599466562271,
0.03563043847680092,
-0.0268... | accounting challenges might arise regarding the company’s inventory accounting processes?
Inventory Systems Comparison
There are some key differences between perpetual and periodic inventory systems. When a company uses the
perpetual inventory system and makes a purchase, they will automatically update the Merchandise Inventory
account. Under a periodic inventory system, Purchases will be updated, while Merchandise Inventory will
remain unchanged until the company counts and verifies its inventory balance. This count and verification
typically occur at the end of the annual accounting period, which is often on December 31 of the year. The
Merchandise Inventory account balance is reported on the balance sheet while the Purchases account is
reported on the Income Statement when using the periodic inventory method. The Cost of Goods Sold is
reported on the Income Statement under the perpetual inventory method. | {"source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "creationdate": "2019-04-24T10:32:54-05:00", "upload_timestamp": "2026-02-07T07:23:08.167529", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader", "total_pages": 1055, "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf", "file_size_mb": 156.7} |
45ad1704-a6ba-462f-aedd-2fc0f81704a1 | [
-0.04760551080107689,
0.08253668993711472,
-0.01775653474032879,
-0.0036179223097860813,
0.005635496694594622,
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0.03662343695759773,
0.011686963960528374,
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0.04308051988482475,
0.13239148259162903,
0.021931780502200127,
0.07988476008176804,
-0.04199... | reported on the Income Statement when using the periodic inventory method. The Cost of Goods Sold is
reported on the Income Statement under the perpetual inventory method.
A purchase return or allowance under perpetual inventory systems updates Merchandise Inventory for any
decreased cost. Under periodic inventory systems, a temporary account, Purchase Returns and Allowances, is
updated. Purchase Returns and Allowances is a contra account and is used to reduce Purchases.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
381
When a purchase discount is applied under a perpetual inventory system, Merchandise Inventory decreases
for the discount amount. Under a periodic inventory system, Purchase Discounts (a temporary, contra
account), increases for the discount amount and Merchandise Inventory remains unchanged. | {"source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "upload_timestamp": "2026-02-07T07:23:08.167529", "total_pages": 1055, "moddate": "2020-08-05T15:26:11-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf"} |
5d7429cd-cd1f-4383-95ed-ec4542a326d2 | [
-0.0708504393696785,
0.06465324759483337,
-0.035760436207056046,
-0.03151877224445343,
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0.015245847404003143,
0.023428643122315407,
0.013379455544054508,
0.05959121137857437,
0.03563018515706062,
0.10892096161842346,
0.011569935828447342,
0.0614074245095253,
-0.043575827... | for the discount amount. Under a periodic inventory system, Purchase Discounts (a temporary, contra
account), increases for the discount amount and Merchandise Inventory remains unchanged.
When a sale occurs under perpetual inventory systems, two entries are required: one to recognize the sale,
and the other to recognize the cost of sale. For the cost of sale, Merchandise Inventory and Cost of Goods Sold
are updated. Under periodic inventory systems, this cost of sale entry does not exist. The recognition of
merchandise cost only occurs at the end of the period when adjustments are made and temporary accounts
are closed.
When a sales return occurs, perpetual inventory systems require recognition of the inventory’s condition. This
means a decrease to COGS and an increase to Merchandise Inventory. Under periodic inventory systems, only
the sales return is recognized, but not the inventory condition entry.
382
Chapter 6 Merchandising Transactions | {"file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "file_name": "FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "moddate": "2020-08-05T15:26:11-05:00", "batch_upload": true, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
b0ac181e-f472-4780-b775-95575d30d914 | [
-0.027617409825325012,
0.0384322926402092,
0.001754876459017396,
-0.03100060299038887,
-0.030106713995337486,
0.062454063445329666,
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0.008792717009782791,
-0.02256612665951252,
0.012253369204699993,
0.039022356271743774,
0.034124307334423065,
0.024789782240986824,
-0.0... | the sales return is recognized, but not the inventory condition entry.
382
Chapter 6 Merchandising Transactions
A sales allowance and sales discount follow the same recording formats for either perpetual or periodic
inventory systems.
Adjusting and Closing Entries for a Perpetual Inventory System
You have already explored adjusting entries and the closing process in prior discussions, but merchandising
activities require additional adjusting and closing entries to inventory, sales discounts, returns, and
allowances. Here, we’ll briefly discuss these additional closing entries and adjustments as they relate to the
perpetual inventory system.
At the end of the period, a perpetual inventory system will have the Merchandise Inventory account up-to-
date; the only thing left to do is to compare a physical count of inventory to what is on the books. A physical
inventory count requires companies to do a manual “stock-check” of inventory to make sure what they have | {"file_type": ".pdf", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
417b09b8-a1ee-4cf8-b6bc-8184cd475d92 | [
-0.015311290509998798,
0.07338518649339676,
0.02528829127550125,
0.0012995294528082013,
0.016117921099066734,
0.020374123007059097,
0.006493248511105776,
0.04109705239534378,
0.031574591994285583,
0.009744636714458466,
0.10718764364719391,
0.010986625216901302,
0.027146734297275543,
-0.057... | inventory count requires companies to do a manual “stock-check” of inventory to make sure what they have
recorded on the books matches what they physically have in stock. Differences could occur due to
mismanagement, shrinkage, damage, or outdated merchandise. Shrinkage is a term used when inventory or
other assets disappear without an identifiable reason, such as theft. For a perpetual inventory system, the
adjusting entry to show this difference follows. This example assumes that the merchandise inventory is
overstated in the accounting records and needs to be adjusted downward to reflect the actual value on hand.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
383
If a physical count determines that merchandise inventory is understated in the accounting records,
Merchandise Inventory would need to be increased with a debit entry and the COGS would be reduced with a
credit entry. The adjusting entry is: | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_name": "FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "batch_upload": true, "uploaded_via": "batch_uploader", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1"} |
d6726910-7443-4c4c-b41f-ffacfb77431f | [
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-0.0044726841151714325,
-0.024141648784279823,
-0.003862510435283184,
0.0503927543759346,
0.020810194313526154,
0.020803557708859444,
0.018423575907945633,
0.015807578340172768,
0.08642731606960297,
-0.045715946704149246,
-0.002590735675767064,
-... | Merchandise Inventory would need to be increased with a debit entry and the COGS would be reduced with a
credit entry. The adjusting entry is:
To sum up the potential adjustment process, after the merchandise inventory has been verified with a physical
count, its book value is adjusted upward or downward to reflect the actual inventory on hand, with an
accompanying adjustment to the COGS.
Not only must an adjustment to Merchandise Inventory occur at the end of a period, but closure of temporary
merchandising accounts to prepare them for the next period is required. Temporary accounts requiring
closure are Sales, Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold. Sales will close with
the temporary credit balance accounts to Income Summary.
Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold will close with the temporary debit
balance accounts to Income Summary. | {"file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "moddate": "2020-08-05T15:26:11-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
0eda202b-3b1c-4aeb-9e17-18038d578f50 | [
-0.04514005407691002,
0.055733975023031235,
-0.027427176013588905,
-0.04721146821975708,
-0.03933211788535118,
0.0047600106336176395,
0.011137730441987514,
0.053689368069171906,
0.013079850003123283,
0.04537218064069748,
0.07466676086187363,
-0.025522049516439438,
0.016144592314958572,
-0.... | Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold will close with the temporary debit
balance accounts to Income Summary.
Note that for a periodic inventory system, the end of the period adjustments require an update to COGS. To
determine the value of Cost of Goods Sold, the business will have to look at the beginning inventory balance,
purchases, purchase returns and allowances, discounts, and the ending inventory balance.
The formula to compute COGS is:
where:
Once the COGS balance has been established, an adjustment is made to Merchandise Inventory and COGS,
and COGS is closed to prepare for the next period.
Table 6.1 summarizes the differences between the perpetual and periodic inventory systems.
384
Chapter 6 Merchandising Transactions
Perpetual and Periodic Transaction Comparison
Transaction
Perpetual Inventory System
Periodic Inventory System
Purchase of
Inventory
Record cost to Inventory account
Record cost to Purchases
account | {"uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "producer": "Prince 11 (www.princexml.com)", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
b598ffb1-875c-46b3-9b25-f188ebbaa938 | [
-0.0633205771446228,
0.05887565389275551,
-0.07302100956439972,
-0.02802608162164688,
-0.02595822513103485,
0.03138728812336922,
-0.0011481577530503273,
0.02390860952436924,
0.040914230048656464,
0.016078397631645203,
0.06024043262004852,
0.011005650274455547,
0.0812254473567009,
-0.051290... | Transaction
Perpetual Inventory System
Periodic Inventory System
Purchase of
Inventory
Record cost to Inventory account
Record cost to Purchases
account
Purchase Return
Record to update Inventory
Record to Purchase Returns and
or Allowance
Allowances
Purchase Discount
Record to update Inventory
Record to Purchase Discounts
Sale of
Record two entries: one for sale and one for cost
Record one entry for the sale
Merchandise
of sale
Sales Return
Record two entries: one for sales return, one for
Record one entry: sales return,
cost of inventory returned
cost not recognized
Sales Allowance
Same under both systems
Same under both systems
Sales Discount
Same under both systems
Same under both systems
Table 6.1 There are several differences in account recognition between the perpetual and periodic inventory
systems.
There are advantages and disadvantages to both the perpetual and periodic inventory systems.
C O N C E P T S I N P R A C T I C E | {"upload_timestamp": "2026-02-07T07:23:08.167529", "total_pages": 1055, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "file_type": ".pdf", "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_name": "FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "producer": "Prince 11 (www.princexml.com)", "moddate": "2020-08-05T15:26:11-05:00"} |
26da323c-6ad8-4f3e-820d-6e6241e52c84 | [
-0.03974373638629913,
0.06067178025841713,
-0.039680641144514084,
0.008029517717659473,
-0.09621573239564896,
0.048713020980358124,
-0.0012138041201978922,
0.024998053908348083,
0.10787058621644974,
0.009682653471827507,
0.06223047524690628,
0.11364737153053284,
0.03007892519235611,
-0.015... | systems.
There are advantages and disadvantages to both the perpetual and periodic inventory systems.
C O N C E P T S I N P R A C T I C E
Point-of-Sale Systems
Advancements in point-of-sale (POS) systems have simplified the once tedious task of inventory
management. POS systems connect with inventory management programs to make real-time data
available to help streamline business operations. The cost of inventory management decreases with this
connection tool, allowing all businesses to stay current with technology without “breaking the bank.”
One such POS system is Square. Square accepts many payment types and updates accounting records
every time a sale occurs through a cloud-based application. Square, Inc. has expanded their product
offerings to include Square for Retail POS. This enhanced product allows businesses to connect sales and
inventory costs immediately. A business can easily create purchase orders, develop reports for cost of | {"source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "total_pages": 1055, "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "uploaded_via": "batch_uploader", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf"} |
d47f4e2d-cc9a-4245-8b4e-8c14fdfce8a7 | [
-0.02507167123258114,
0.08821603655815125,
-0.031446412205696106,
-0.009341632016003132,
0.007592075038701296,
-0.0019042836502194405,
0.004156921524554491,
0.04112798720598221,
0.051289282739162445,
0.08368910104036331,
0.0769122764468193,
0.0507732592523098,
0.01977473683655262,
-0.05636... | inventory costs immediately. A business can easily create purchase orders, develop reports for cost of
goods sold, manage inventory stock, and update discounts, returns, and allowances. With this
application, customers have payment flexibility, and businesses can make present decisions to positively
affect growth.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
385
Advantages and Disadvantages of the Perpetual Inventory System
The perpetual inventory system gives real-time updates and keeps a constant flow of inventory information
available for decision-makers. With advancements in point-of-sale technologies, inventory is updated
automatically and transferred into the company’s accounting system. This allows managers to make decisions
as it relates to inventory purchases, stocking, and sales. The information can be more robust, with exact | {"uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "batch_upload": true, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_name": "FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
d39db909-c069-4a3b-be6e-23c53a5e7323 | [
-0.03593718260526657,
0.04000347480177879,
-0.019751563668251038,
0.042370155453681946,
-0.010340641252696514,
0.030903125181794167,
-0.07959382981061935,
0.030298277735710144,
0.08770217001438141,
0.03108528070151806,
0.0664806216955185,
0.053699806332588196,
0.04106779769062996,
-0.02043... | as it relates to inventory purchases, stocking, and sales. The information can be more robust, with exact
purchase costs, sales prices, and dates known. Although a periodic physical count of inventory is still required,
a perpetual inventory system may reduce the number of times physical counts are needed.
The biggest disadvantages of using the perpetual inventory systems arise from the resource constraints for
cost and time. It is costly to keep an automatic inventory system up-to-date. This may prohibit smaller or less
established companies from investing in the required technologies. The time commitment to train and retrain
staff to update inventory is considerable. In addition, since there are fewer physical counts of inventory, the
figures recorded in the system may be drastically different from inventory levels in the actual warehouse. A
company may not have correct inventory stock and could make financial decisions based on incorrect data. | {"file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00", "file_name": "FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "title": "Principles of Accounting, Volume 1: Financial Accounting", "creator": "DocBook XSL Stylesheets V1.79.1", "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "file_size_mb": 156.7, "batch_upload": true} |
0d378bbb-b3d0-4587-964a-8aabe1b953db | [
-0.02482391707599163,
0.06530529260635376,
-0.043237265199422836,
0.04669344052672386,
-0.02358906716108322,
-0.0066955178044736385,
-0.018333837389945984,
-0.01230069249868393,
0.0838538184762001,
0.03159845620393753,
0.07266218215227127,
-0.0011681733885779977,
0.03623117879033089,
-0.03... | company may not have correct inventory stock and could make financial decisions based on incorrect data.
Advantages and Disadvantages of the Periodic Inventory System
The periodic inventory system is often less expensive and time consuming than perpetual inventory systems.
This is because there is no constant maintenance of inventory records or training and retraining of employees
to upkeep the system. The complexity of the system makes it difficult to identify the cost justification
associated with the inventory function.
While both the periodic and perpetual inventory systems require a physical count of inventory, periodic
inventorying requires more physical counts to be conducted. This updates the inventory account more
frequently to record exact costs. Knowing the exact costs earlier in an accounting cycle can help a company
stay on budget and control costs.
However, the need for frequent physical counts of inventory can suspend business operations each time this is | {"moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "uploaded_via": "batch_uploader", "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf"} |
c54afb22-e6d7-4af4-84f3-152806142fd4 | [
-0.05134168639779091,
0.06096890568733215,
-0.07773888111114502,
-0.017813460901379585,
-0.0060590943321585655,
0.03445820137858391,
0.020281599834561348,
0.005123309791088104,
0.03481467813253403,
-0.009317592717707157,
0.047231998294591904,
0.02876485511660576,
0.042594410479068756,
0.00... | stay on budget and control costs.
However, the need for frequent physical counts of inventory can suspend business operations each time this is
done. There are more chances for shrinkage, damaged, or obsolete merchandise because inventory is not
constantly monitored. Since there is no constant monitoring, it may be more difficult to make in-the-moment
business decisions about inventory needs.
While each inventory system has its own advantages and disadvantages, the more popular system is the
perpetual inventory system. The ability to have real-time data to make decisions, the constant update to
inventory, and the integration to point-of-sale systems, outweigh the cost and time investments needed to
maintain the system. (While our main coverage focuses on recognition under the perpetual inventory system,
Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory
System discusses recognition under the periodic inventory system.) | {"file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
c32947a0-b22d-48d3-9491-584eb71832f8 | [
0.0008150030625984073,
0.06073857471346855,
-0.016727199777960777,
-0.012138214893639088,
-0.026363572105765343,
0.004466396290808916,
-0.010142181999981403,
0.01604890450835228,
0.045212291181087494,
0.009998425841331482,
0.0895891785621643,
0.011262645944952965,
0.020436497405171394,
-0.... | Appendix: Analyze and Record Transactions for Merchandise Purchases and Sales Using the Periodic Inventory
System discusses recognition under the periodic inventory system.)
T H I N K I T T H R O U G H
Comparing Inventory Systems
Your company uses a perpetual inventory system to control its operations. They only check inventory
once every six months. At the 6-month physical count, an employee notices several inventory items
missing and many damaged units. In the company records, it shows an inventory balance of $300,000.
386
Chapter 6 Merchandising Transactions
The actual physical count values inventory at $200,000. This is a significant difference in valuation and
has jeopardized the future of the company. As a manager, how might you avoid this large discrepancy in
the future? Would a change in inventory systems benefit the company? Are you constrained by any
resources?
6.3 Analyze and Record Transactions for Merchandise Purchases Using the | {"producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_name": "FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "uploaded_via": "batch_uploader", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529"} |
f6ea497b-6fd7-4edb-a2f5-42d93ff40868 | [
-0.044327251613140106,
0.06989684700965881,
-0.018060412257909775,
-0.08660241216421127,
-0.001839890843257308,
0.025125475600361824,
0.002530529396608472,
-0.0029250674415379763,
-0.023134512826800346,
-0.026846621185541153,
0.08834484964609146,
0.04666033387184143,
-0.0005769397248513997,
... | the future? Would a change in inventory systems benefit the company? Are you constrained by any
resources?
6.3 Analyze and Record Transactions for Merchandise Purchases Using the
Perpetual Inventory System
The following example transactions and subsequent journal entries for merchandise purchases are recognized
using a perpetual inventory system. The periodic inventory system recognition of these example transactions
and corresponding journal entries are shown in Appendix: Analyze and Record Transactions for Merchandise
Purchases and Sales Using the Periodic Inventory System.
Basic Analysis of Purchase Transaction Journal Entries
To better illustrate merchandising activities, let’s follow California Business Solutions (CBS), a retailer providing
electronic hardware packages to meet small business needs. Each electronics hardware package (see
Figure 6.9) contains a desktop computer, tablet computer, landline telephone, and a 4-in-1 desktop printer | {"moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "total_pages": 1055, "producer": "Prince 11 (www.princexml.com)"} |
5045ffc3-d4be-4a5b-8173-1fbcff306161 | [
-0.008366202935576439,
-0.0018879524432122707,
0.00552004761993885,
-0.10202793776988983,
-0.022777054458856583,
-0.0029090698808431625,
0.05568142235279083,
0.08312631398439407,
0.025472000241279602,
0.01610608585178852,
0.060383833944797516,
-0.024967124685645103,
0.03833158686757088,
-0... | Figure 6.9) contains a desktop computer, tablet computer, landline telephone, and a 4-in-1 desktop printer
with a printer, copier, scanner, and fax machine.
Figure 6.9
California Business Solutions. Providing businesses electronic hardware solutions. (credit:
modification of “Professionnal desk” by “reynermedia”/Flickr, CC BY 2.0)
CBS purchases each electronic product from a manufacturer. The following are the per-item purchase prices
from the manufacturer.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
387
Cash and Credit Purchase Transaction Journal Entries
On April 1, CBS purchases 10 electronic hardware packages at a cost of $620 each. CBS has enough cash-on-
hand to pay immediately with cash. The following entry occurs.
Merchandise Inventory-Packages increases (debit) for 6,200 ($620 × 10), and Cash decreases (credit) because | {"title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "total_pages": 1055, "uploaded_via": "batch_uploader", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
d3ff75af-190f-49ef-9103-9d7735898951 | [
-0.04154980927705765,
0.020969536155462265,
0.056813981384038925,
-0.10261539369821548,
-0.021561751142144203,
0.015109009109437466,
0.024351060390472412,
0.048727668821811676,
0.02155519835650921,
0.05473363772034645,
0.04138824716210365,
-0.06859338283538818,
-0.008419002406299114,
-0.09... | hand to pay immediately with cash. The following entry occurs.
Merchandise Inventory-Packages increases (debit) for 6,200 ($620 × 10), and Cash decreases (credit) because
the company paid with cash. It is important to distinguish each inventory item type to better track inventory
needs.
On April 7, CBS purchases 30 desktop computers on credit at a cost of $400 each. The credit terms are n/15
with an invoice date of April 7. The following entry occurs.
Merchandise Inventory is specific to desktop computers and is increased (debited) for the value of the
computers by $12,000 ($400 × 30). Since the computers were purchased on credit by CBS, Accounts Payable
increases (credit).
On April 17, CBS makes full payment on the amount due from the April 7 purchase. The following entry occurs.
Accounts Payable decreases (debit), and Cash decreases (credit) for the full amount owed. The credit terms | {"file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "total_pages": 1055, "uploaded_via": "batch_uploader", "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00"} |
32e015a9-c870-416c-a315-02d129cf3dc0 | [
-0.044894784688949585,
0.04456934332847595,
0.036970820277929306,
-0.10192221403121948,
-0.004927895497530699,
-0.02708626724779606,
0.018920931965112686,
0.06192651391029358,
0.055295754224061966,
0.04917424917221069,
0.07689780741930008,
-0.017468562349677086,
0.009268052875995636,
-0.06... | Accounts Payable decreases (debit), and Cash decreases (credit) for the full amount owed. The credit terms
were n/15, which is net due in 15 days. No discount was offered with this transaction. Thus the full payment of
$12,000 occurs.
Purchase Discount Transaction Journal Entries
On May 1, CBS purchases 67 tablet computers at a cost of $60 each on credit. The payment terms are 5/10, n/
388
Chapter 6 Merchandising Transactions
30, and the invoice is dated May 1. The following entry occurs.
Merchandise Inventory-Tablet Computers increases (debit) in the amount of $4,020 (67 × $60). Accounts
Payable also increases (credit) but the credit terms are a little different than the previous example. These
credit terms include a discount opportunity (5/10), meaning, CBS has 10 days from the invoice date to pay on
their account to receive a 5% discount on their purchase.
On May 10, CBS pays their account in full. The following entry occurs. | {"title": "Principles of Accounting, Volume 1: Financial Accounting", "creationdate": "2019-04-24T10:32:54-05:00", "upload_timestamp": "2026-02-07T07:23:08.167529", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1", "file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "batch_upload": true, "producer": "Prince 11 (www.princexml.com)"} |
242352ae-be4e-4167-ae04-907e830762ca | [
-0.032403722405433655,
0.05022403597831726,
0.055435869842767715,
-0.08583410084247589,
0.011725914664566517,
0.021877659484744072,
0.026538429781794548,
0.05128108710050583,
0.07667415589094162,
0.06119103357195854,
0.07732081413269043,
-0.03194822743535042,
0.009629343636333942,
-0.02978... | their account to receive a 5% discount on their purchase.
On May 10, CBS pays their account in full. The following entry occurs.
Accounts Payable decreases (debit) for the original amount owed of $4,020 before any discounts are taken.
Since CBS paid on May 10, they made the 10-day window and thus received a discount of 5%. Cash decreases
(credit) for the amount owed, less the discount. Merchandise Inventory-Tablet Computers decreases (credit)
for the amount of the discount ($4,020 × 5%). Merchandise Inventory decreases to align with the Cost
Principle, reporting the value of the merchandise at the reduced cost.
Let’s take the same example purchase with the same credit terms, but now CBS paid their account on May 25.
The following entry would occur instead.
Accounts Payable decreases (debit) and Cash decreases (credit) for $4,020. The company paid on their account
outside of the discount window but within the total allotted timeframe for payment. CBS does not receive a | {"upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "batch_upload": true, "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00"} |
36e8dc8b-9a58-4775-9917-54544db86bc0 | [
-0.045301374047994614,
0.028189919888973236,
0.08164989203214645,
-0.09683390706777573,
-0.0034370459616184235,
-0.00456264428794384,
0.05683320388197899,
0.07033396512269974,
0.037062205374240875,
0.033513590693473816,
0.07472426444292068,
-0.004130963236093521,
0.02299003303050995,
-0.12... | outside of the discount window but within the total allotted timeframe for payment. CBS does not receive a
discount in this case but does pay in full and on time.
Purchase Returns and Allowances Transaction Journal Entries
On June 1, CBS purchased 300 landline telephones with cash at a cost of $60 each. On June 3, CBS discovers
that 25 of the phones are the wrong color and returns the phones to the manufacturer for a full refund. The
following entries occur with the purchase and subsequent return.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
389
Both Merchandise Inventory-Phones increases (debit) and Cash decreases (credit) by $18,000 ($60 × 300).
Since CBS already paid in full for their purchase, a full cash refund is issued. This increases Cash (debit) and
decreases (credit) Merchandise Inventory-Phones because the merchandise has been returned to the
manufacturer or supplier. | {"file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting", "creationdate": "2019-04-24T10:32:54-05:00"} |
5f7685ee-dbf0-49cc-ac7c-9639dc80aa69 | [
-0.06784529983997345,
0.05201775208115578,
0.07925219088792801,
-0.07114915549755096,
-0.027058325707912445,
0.03518497943878174,
0.0016000336036086082,
0.08056578785181046,
0.008954751305282116,
0.008006095886230469,
0.07214800268411636,
0.006410881876945496,
0.06046794354915619,
-0.06220... | decreases (credit) Merchandise Inventory-Phones because the merchandise has been returned to the
manufacturer or supplier.
On June 8, CBS discovers that 60 more phones from the June 1 purchase are slightly damaged. CBS decides to
keep the phones but receives a purchase allowance from the manufacturer of $8 per phone. The following
entry occurs for the allowance.
Since CBS already paid in full for their purchase, a cash refund of the allowance is issued in the amount of $480
(60 × $8). This increases Cash (debit) and decreases (credit) Merchandise Inventory-Phones because the
merchandise is less valuable than before the damage discovery.
CBS purchases 80 units of the 4-in-1 desktop printers at a cost of $100 each on July 1 on credit. Terms of the
purchase are 5/15, n/40, with an invoice date of July 1. On July 6, CBS discovers 15 of the printers are damaged
and returns them to the manufacturer for a full refund. The following entries show the purchase and
subsequent return. | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "batch_upload": true, "total_pages": 1055, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "upload_timestamp": "2026-02-07T07:23:08.167529", "title": "Principles of Accounting, Volume 1: Financial Accounting"} |
392b6d32-3134-4582-9d80-624c1bab67d4 | [
-0.04623155668377876,
0.049149177968502045,
0.02793985605239868,
-0.04301877319812775,
0.04015186056494713,
0.021283907815814018,
0.03210970386862755,
0.03645007684826851,
-0.05220755934715271,
0.00184180389624089,
0.10824619233608246,
0.010702328756451607,
0.04850063472986221,
-0.04443298... | and returns them to the manufacturer for a full refund. The following entries show the purchase and
subsequent return.
Both Merchandise Inventory-Printers increases (debit) and Accounts Payable increases (credit) by $8,000 ($100
× 80).
390
Chapter 6 Merchandising Transactions
Both Accounts Payable decreases (debit) and Merchandise Inventory-Printers decreases (credit) by $1,500 (15
× $100). The purchase was on credit and the return occurred before payment, thus decreasing Accounts
Payable. Merchandise Inventory decreases due to the return of the merchandise back to the manufacturer.
On July 10, CBS discovers that 4 more printers from the July 1 purchase are slightly damaged but decides to
keep them, with the manufacturer issuing an allowance of $30 per printer. The following entry recognizes the
allowance.
Both Accounts Payable decreases (debit) and Merchandise Inventory-Printers decreases (credit) by $120 (4 × | {"file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader", "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
fb45b17c-6d14-46e7-aded-8362b8eaa2df | [
-0.015036145225167274,
0.08004330098628998,
0.02819429151713848,
-0.034091487526893616,
-0.005033047404140234,
0.03740835562348366,
0.024596039205789566,
0.0578460693359375,
-0.00398280331864953,
0.030712801963090897,
0.06956571340560913,
-0.022815734148025513,
0.024932842701673508,
-0.030... | allowance.
Both Accounts Payable decreases (debit) and Merchandise Inventory-Printers decreases (credit) by $120 (4 ×
$30). The purchase was on credit and the allowance occurred before payment, thus decreasing Accounts
Payable. Merchandise Inventory decreases due to the loss in value of the merchandise.
On July 15, CBS pays their account in full, less purchase returns and allowances. The following payment entry
occurs.
Accounts Payable decreases (debit) for the amount owed, less the return of $1,500 and the allowance of $120
($8,000 – $1,500 – $120). Since CBS paid on July 15, they made the 15-day window, thus receiving a discount of
5%. Cash decreases (credit) for the amount owed, less the discount. Merchandise Inventory-Printers decreases
(credit) for the amount of the discount ($6,380 × 5%). Merchandise Inventory decreases to align with the Cost
Principle, reporting the value of the merchandise at the reduced cost.
Summary of Purchase Transaction Journal Entries | {"file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "uploaded_via": "batch_uploader", "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "creator": "DocBook XSL Stylesheets V1.79.1", "file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "producer": "Prince 11 (www.princexml.com)", "moddate": "2020-08-05T15:26:11-05:00"} |
242aea11-0a3d-4ff7-8ee1-33284e5d0673 | [
0.0003543986822478473,
0.0805337131023407,
-0.014432689175009727,
0.0012847431935369968,
0.026430824771523476,
0.04361579194664955,
-0.005992228165268898,
0.06899815797805786,
0.041053466498851776,
0.028262732550501823,
0.06502503156661987,
0.022042399272322655,
0.07684822380542755,
-0.001... | Principle, reporting the value of the merchandise at the reduced cost.
Summary of Purchase Transaction Journal Entries
The chart in Figure 6.10 represents the journal entry requirements based on various merchandising purchase
transactions using the perpetual inventory system.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
391
Figure 6.10
Purchase Transaction Journal Entries Using a Perpetual Inventory System. (attribution: Copyright
Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Note that Figure 6.10 considers an environment in which inventory physical counts and matching books
records align. This is not always the case given concerns with shrinkage (theft), damages, or obsolete
merchandise. In this circumstance, an adjustment is recorded to inventory to account for the differences
between the physical count and the amount represented on the books.
Y O U R T U R N | {"moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader", "batch_upload": true, "file_type": ".pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055, "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529"} |
57fe4dc1-57de-4741-bf7f-80259891ec7a | [
-0.059784289449453354,
0.01731095276772976,
-0.015681348741054535,
-0.009221665561199188,
-0.05392388254404068,
0.050565604120492935,
0.05334339663386345,
0.030554644763469696,
0.06267326325178146,
0.04268651083111763,
0.0708371177315712,
0.006379086524248123,
0.04431061074137688,
-0.05970... | merchandise. In this circumstance, an adjustment is recorded to inventory to account for the differences
between the physical count and the amount represented on the books.
Y O U R T U R N
Recording a Retailer’s Purchase Transactions
Record the journal entries for the following purchase transactions of a retailer.
Dec. 3
Purchased $500 worth of inventory on credit with terms 2/10, n/30, and invoice dated
December 3.
Dec. 6
Returned $150 worth of damaged inventory to the manufacturer and received a full refund.
Dec. 9
Paid the account in full
Solution
392
Chapter 6 Merchandising Transactions
L I N K T O L E A R N I N G
Bean Counter is a website that offers free, fun and interactive games, simulations, and quizzes about
accounting. You can “Fling the Teacher,” “Walk the Plank,” and play “Basketball” while learning the
fundamentals of accounting topics. Check out Bean Counter (https://openstax.org/l/50BeanCounter) to
see what you can learn. | {"total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "uploaded_via": "batch_uploader", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00"} |
fc918c54-6576-410a-8766-bb596b2a0127 | [
-0.027508700266480446,
0.03904031589627266,
-0.04877842962741852,
-0.06626340001821518,
-0.06510825455188751,
0.02800809033215046,
0.04328031465411186,
0.02343755029141903,
0.020481577143073082,
-0.00820703711360693,
0.06736677885055542,
0.017190702259540558,
0.0468614399433136,
-0.0396040... | fundamentals of accounting topics. Check out Bean Counter (https://openstax.org/l/50BeanCounter) to
see what you can learn.
6.4 Analyze and Record Transactions for the Sale of Merchandise Using the
Perpetual Inventory System
The following example transactions and subsequent journal entries for merchandise sales are recognized
using a perpetual inventory system. The periodic inventory system recognition of these example transactions
and corresponding journal entries are shown in Appendix: Analyze and Record Transactions for Merchandise
Purchases and Sales Using the Periodic Inventory System.
Basic Analysis of Sales Transaction Journal Entries
Let’s continue to follow California Business Solutions (CBS) and their sales of electronic hardware packages to
business customers. As previously stated, each package contains a desktop computer, tablet computer,
landline telephone, and a 4-in-1 printer. CBS sells each hardware package for $1,200. They offer their | {"title": "Principles of Accounting, Volume 1: Financial Accounting", "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "batch_upload": true, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00"} |
0b7b1a1d-fed2-473a-a388-c5c1d2bb7548 | [
-0.02950703352689743,
-0.014362591318786144,
-0.023373514413833618,
-0.08552530407905579,
-0.05670345574617386,
-0.04930232837796211,
0.03584896773099899,
0.09944195300340652,
0.023971255868673325,
0.0007091062143445015,
0.011878377757966518,
-0.02078176848590374,
0.020856114104390144,
-0.... | landline telephone, and a 4-in-1 printer. CBS sells each hardware package for $1,200. They offer their
customers the option of purchasing extra individual hardware items for every electronic hardware package
purchase. Figure 6.11 lists the products CBS sells to customers; the prices are per-package, and per unit.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
393
Figure 6.11
CBS’s Product Line. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0
license)
Cash and Credit Sales Transaction Journal Entries
On July 1, CBS sells 10 electronic hardware packages to a customer at a sales price of $1,200 each. The
customer pays immediately with cash. The following entries occur.
In the first entry, Cash increases (debit) and Sales increases (credit) for the selling price of the packages, | {"source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00", "total_pages": 1055, "producer": "Prince 11 (www.princexml.com)", "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "file_size_mb": 156.7, "creator": "DocBook XSL Stylesheets V1.79.1", "file_type": ".pdf", "uploaded_via": "batch_uploader"} |
74825445-d399-4983-81c6-43d8bcd7942f | [
-0.038830872625112534,
0.028057735413312912,
0.03646710142493248,
-0.1136334165930748,
-0.07257993519306183,
0.003966897260397673,
0.01583072543144226,
0.07609828561544418,
0.03924407437443733,
0.02801864966750145,
0.04645572975277901,
-0.07810315489768982,
0.04284480959177017,
-0.09779607... | customer pays immediately with cash. The following entries occur.
In the first entry, Cash increases (debit) and Sales increases (credit) for the selling price of the packages,
$12,000 ($1,200 × 10). In the second entry, the cost of the sale is recognized. COGS increases (debit) and
Merchandise Inventory-Packages decreases (credit) for the cost of the packages, $6,200 ($620 × 10).
On July 7, CBS sells 20 desktop computers to a customer on credit. The credit terms are n/15 with an invoice
date of July 7. The following entries occur.
Since the computers were purchased on credit by the customer, Accounts Receivable increases (debit) and
Sales increases (credit) for the selling price of the computers, $15,000 ($750 × 20). In the second entry,
Merchandise Inventory-Desktop Computers decreases (credit), and COGS increases (debit) for the cost of the
computers, $8,000 ($400 × 20). | {"producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "uploaded_via": "batch_uploader", "batch_upload": true, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00"} |
3b762734-d86b-4d40-b549-a3207bf0ba40 | [
-0.04904663562774658,
0.07497478276491165,
0.04368286207318306,
-0.09087277203798294,
-0.013195192441344261,
-0.032495465129613876,
0.003950890619307756,
0.04838070645928383,
0.03655910864472389,
0.05960797891020775,
0.11396274715662003,
-0.03900670260190964,
0.028709201142191887,
-0.05150... | Merchandise Inventory-Desktop Computers decreases (credit), and COGS increases (debit) for the cost of the
computers, $8,000 ($400 × 20).
On July 17, the customer makes full payment on the amount due from the July 7 sale. The following entry
occurs.
394
Chapter 6 Merchandising Transactions
Accounts Receivable decreases (credit) and Cash increases (debit) for the full amount owed. The credit terms
were n/15, which is net due in 15 days. No discount was offered with this transaction; thus the full payment of
$15,000 occurs.
Sales Discount Transaction Journal Entries
On August 1, a customer purchases 56 tablet computers on credit. The payment terms are 2/10, n/30, and the
invoice is dated August 1. The following entries occur.
In the first entry, both Accounts Receivable (debit) and Sales (credit) increase by $16,800 ($300 × 56). These
credit terms are a little different than the earlier example. These credit terms include a discount opportunity | {"file_size_mb": 156.7, "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "total_pages": 1055, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_type": ".pdf", "moddate": "2020-08-05T15:26:11-05:00", "batch_upload": true, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_name": "FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00"} |
fb3b3c72-4f0b-46f9-9c09-6e38e42e507d | [
-0.10315247625112534,
0.05969209596514702,
0.03579483553767204,
-0.09050153940916061,
-0.037963397800922394,
-0.0011803139932453632,
-0.01309777982532978,
0.09232708811759949,
0.05170222744345665,
0.02688189223408699,
0.07621066272258759,
-0.015434655360877514,
0.006759107578545809,
-0.051... | credit terms are a little different than the earlier example. These credit terms include a discount opportunity
(2/10), meaning the customer has 10 days from the invoice date to pay on their account to receive a 2%
discount on their purchase. In the second entry, COGS increases (debit) and Merchandise Inventory–Tablet
Computers decreases (credit) in the amount of $3,360 (56 × $60).
On August 10, the customer pays their account in full. The following entry occurs.
Since the customer paid on August 10, they made the 10-day window and received a discount of 2%. Cash
increases (debit) for the amount paid to CBS, less the discount. Sales Discounts increases (debit) for the
amount of the discount ($16,800 × 2%), and Accounts Receivable decreases (credit) for the original amount
owed, before discount. Sales Discounts will reduce Sales at the end of the period to produce net sales. | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "creator": "DocBook XSL Stylesheets V1.79.1", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "uploaded_via": "batch_uploader", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "file_name": "FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_size_mb": 156.7} |
51621d7c-462a-4aca-9bab-0dbbda0c5750 | [
-0.0723617896437645,
0.0625375509262085,
0.02826193906366825,
-0.061670102179050446,
-0.004036288242787123,
-0.024967581033706665,
-0.012472554109990597,
0.025360332801938057,
0.057659901678562164,
0.04428654536604881,
0.07317018508911133,
0.03730998933315277,
0.07900053262710571,
-0.05996... | owed, before discount. Sales Discounts will reduce Sales at the end of the period to produce net sales.
Let’s take the same example sale with the same credit terms, but now assume the customer paid their account
on August 25. The following entry occurs.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
395
Cash increases (debit) and Accounts Receivable decreases (credit) by $16,800. The customer paid on their
account outside of the discount window but within the total allotted timeframe for payment. The customer
does not receive a discount in this case but does pay in full and on time.
Y O U R T U R N
Recording a Retailer’s Sales Transactions
Record the journal entries for the following sales transactions by a retailer.
Jan. 5
Sold $2,450 of merchandise on credit (cost of $1,000), with terms 2/10, n/30, and invoice
dated January 5.
Jan. 9 | {"source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "file_size_mb": 156.7, "batch_upload": true, "upload_timestamp": "2026-02-07T07:23:08.167529", "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055} |
bbbf55d8-5662-4220-a042-131e9d6b610b | [
-0.07414331287145615,
0.059036824852228165,
0.094138965010643,
-0.08358701318502426,
-0.008674999698996544,
0.0009461344452574849,
0.039722979068756104,
0.06852084398269653,
0.029696399345993996,
0.004493453539907932,
0.05567757785320282,
-0.006704392377287149,
0.03333396092057228,
-0.1109... | Jan. 5
Sold $2,450 of merchandise on credit (cost of $1,000), with terms 2/10, n/30, and invoice
dated January 5.
Jan. 9
The customer returned $500 worth of slightly damaged merchandise to the retailer and
received a full refund. The retailer returned the merchandise to its inventory at a cost of
$130.
Jan. 14
Account paid in full.
Solution
396
Chapter 6 Merchandising Transactions
Sales Returns and Allowances Transaction Journal Entries
On September 1, CBS sold 250 landline telephones to a customer who paid with cash. On September 3, the
customer discovers that 40 of the phones are the wrong color and returns the phones to CBS in exchange for a
full refund. CBS determines that the returned merchandise can be resold and returns the merchandise to
inventory at its original cost. The following entries occur for the sale and subsequent return.
In the first entry on September 1, Cash increases (debit) and Sales increases (credit) by $37,500 (250 × $150), | {"file_size_mb": 156.7, "creator": "DocBook XSL Stylesheets V1.79.1", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "total_pages": 1055, "uploaded_via": "batch_uploader", "moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529"} |
7d2a57c3-0b03-4356-ab0b-c076b9bb3003 | [
-0.08901858329772949,
0.008989406749606133,
0.065823033452034,
-0.12845489382743835,
-0.05478906258940697,
0.028434397652745247,
0.027135206386446953,
0.07952740043401718,
-0.003180569503456354,
0.02574331685900688,
0.07733552157878876,
-0.04571455344557762,
0.004282916430383921,
-0.100369... | In the first entry on September 1, Cash increases (debit) and Sales increases (credit) by $37,500 (250 × $150),
the sales price of the phones. In the second entry, COGS increases (debit), and Merchandise Inventory-Phones
decreases (credit) by $15,000 (250 × $60), the cost of the sale.
Since the customer already paid in full for their purchase, a full cash refund is issued on September 3. This
increases Sales Returns and Allowances (debit) and decreases Cash (credit) by $6,000 (40 × $150). The second
entry on September 3 returns the phones back to inventory for CBS because they have determined the
merchandise is in sellable condition at its original cost. Merchandise Inventory–Phones increases (debit) and
COGS decreases (credit) by $2,400 (40 × $60).
On September 8, the customer discovers that 20 more phones from the September 1 purchase are slightly
damaged. The customer decides to keep the phones but receives a sales allowance from CBS of $10 per | {"creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "uploaded_via": "batch_uploader", "total_pages": 1055, "batch_upload": true, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
8d6747e1-9d76-4dfa-8f6b-62a5724d1c17 | [
-0.05256185308098793,
0.05956113338470459,
0.04809029772877693,
-0.08696045726537704,
-0.026563983410596848,
0.03567230701446533,
0.01770174689590931,
0.06503713130950928,
-0.02839914709329605,
0.005867798812687397,
0.09137630462646484,
0.018275061622262,
0.061440303921699524,
-0.086225606... | damaged. The customer decides to keep the phones but receives a sales allowance from CBS of $10 per
phone. The following entry occurs for the allowance.
Since the customer already paid in full for their purchase, a cash refund of the allowance is issued in the
amount of $200 (20 × $10). This increases (debit) Sales Returns and Allowances and decreases (credit) Cash.
CBS does not have to consider the condition of the merchandise or return it to their inventory because the
customer keeps the merchandise.
A customer purchases 55 units of the 4-in-1 desktop printers on October 1 on credit. Terms of the sale are 10/
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
397
15, n/40, with an invoice date of October 1. On October 6, the customer returned 10 of the printers to CBS for a
full refund. CBS returns the printers to their inventory at the original cost. The following entries show the sale | {"batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "producer": "Prince 11 (www.princexml.com)", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1"} |
da6328c2-d116-4697-baa9-2008296e6549 | [
-0.051694825291633606,
0.010564516298472881,
0.007367572747170925,
-0.05027490854263306,
-0.039333418011665344,
0.05093146115541458,
-0.01242191344499588,
0.06135202944278717,
-0.023295391350984573,
0.0048922086134552956,
0.07412021607160568,
-0.020067164674401283,
-0.008929016068577766,
-... | full refund. CBS returns the printers to their inventory at the original cost. The following entries show the sale
and subsequent return.
In the first entry on October 1, Accounts Receivable increases (debit) and Sales increases (credit) by $19,250
(55 × $350), the sales price of the printers. Accounts Receivable is used instead of Cash because the customer
purchased on credit. In the second entry, COGS increases (debit) and Merchandise Inventory–Printers
decreases (credit) by $5,500 (55 × $100), the cost of the sale.
The customer has not yet paid for their purchase as of October 6. Therefore, the return increases Sales
Returns and Allowances (debit) and decreases Accounts Receivable (credit) by $3,500 (10 × $350). The second
entry on October 6 returns the printers back to inventory for CBS because they have determined the
merchandise is in sellable condition at its original cost. Merchandise Inventory–Printers increases (debit) and | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00", "batch_upload": true, "file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "uploaded_via": "batch_uploader", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1"} |
f8f7590a-19be-407f-ac01-33cd466f6d59 | [
-0.0359756201505661,
0.06012251600623131,
0.03656451404094696,
-0.06718215346336365,
0.013676396571099758,
0.05001746490597725,
0.037347786128520966,
0.04346049204468727,
-0.05452950671315193,
0.002623567823320627,
0.09542982280254364,
-0.0240559633821249,
0.019875219091773033,
-0.06873910... | merchandise is in sellable condition at its original cost. Merchandise Inventory–Printers increases (debit) and
COGS decreases (credit) by $1,000 (10 × $100).
On October 10, the customer discovers that 5 printers from the October 1 purchase are slightly damaged, but
decides to keep them, and CBS issues an allowance of $60 per printer. The following entry recognizes the
allowance.
Sales Returns and Allowances increases (debit) and Accounts Receivable decreases (credit) by $300 (5 × $60). A
reduction to Accounts Receivable occurs because the customer has yet to pay their account on October 10.
CBS does not have to consider the condition of the merchandise or return it to their inventory because the
customer keeps the merchandise.
On October 15, the customer pays their account in full, less sales returns and allowances. The following
payment entry occurs.
398
Chapter 6 Merchandising Transactions | {"creator": "DocBook XSL Stylesheets V1.79.1", "file_type": ".pdf", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055, "producer": "Prince 11 (www.princexml.com)", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "uploaded_via": "batch_uploader", "file_size_mb": 156.7} |
42f72c79-ae56-4693-8b9f-6efae50664c2 | [
-0.02092599682509899,
0.06527994573116302,
0.02090570703148842,
-0.07901076227426529,
-0.011889747343957424,
-0.018106814473867416,
-0.008679777383804321,
0.07866694033145905,
0.0032751027029007673,
0.029397642239928246,
0.06333625316619873,
-0.02285434864461422,
0.004115313291549683,
-0.0... | On October 15, the customer pays their account in full, less sales returns and allowances. The following
payment entry occurs.
398
Chapter 6 Merchandising Transactions
Accounts Receivable decreases (credit) for the original amount owed, less the return of $3,500 and the
allowance of $300 ($19,250 – $3,500 – $300). Since the customer paid on October 15, they made the 15-day
window, thus receiving a discount of 10%. Sales Discounts increases (debit) for the discount amount ($15,450 ×
10%). Cash increases (debit) for the amount owed to CBS, less the discount.
Summary of Sales Transaction Journal Entries
The chart in Figure 6.12 represents the journal entry requirements based on various merchandising sales
transactions.
Figure 6.12
Journal Entry Requirements for Merchandise Sales Transaction. (attribution: Copyright Rice
University, OpenStax, under CC BY-NC-SA 4.0 license) | {"file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "file_name": "FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "uploaded_via": "batch_uploader", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
3f42ff47-71cb-41dc-a9d9-28cd3b47ec7a | [
-0.03195389360189438,
0.09528171271085739,
0.03309100121259689,
-0.04364060238003731,
0.031877197325229645,
0.01981673389673233,
0.04543996602296829,
0.03865101933479309,
-0.015791025012731552,
0.02792450599372387,
0.09621382504701614,
-0.020156387239694595,
0.08664166182279587,
-0.0404134... | transactions.
Figure 6.12
Journal Entry Requirements for Merchandise Sales Transaction. (attribution: Copyright Rice
University, OpenStax, under CC BY-NC-SA 4.0 license)
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
399
Y O U R T U R N
Recording a Retailer’s Sales Transactions
Record the journal entries for the following sales transactions of a retailer.
May 10
Sold $8,600 of merchandise on credit (cost of $2,650), with terms 5/10, n/30, and invoice
dated May 10.
May 13
The customer returned $1,250 worth of slightly damaged merchandise to the retailer and
received a full refund. The retailer returned the merchandise to its inventory at a cost of
$380.
May 15
The customer discovered some merchandise were the wrong color and received an
allowance from the retailer of $230.
May 20
The customer paid the account in full, less the return and allowance.
Solution
400 | {"batch_upload": true, "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "total_pages": 1055} |
2e7fdadd-af19-4a29-981a-3c0c5695df93 | [
-0.05686291679739952,
0.0006469832151196897,
0.013475320301949978,
-0.019882362335920334,
0.059067677706480026,
0.025384247303009033,
0.025723421946167946,
0.024063028395175934,
-0.02828650362789631,
0.04234163835644722,
0.08848019689321518,
-0.014484118670225143,
-0.02153143845498562,
0.0... | allowance from the retailer of $230.
May 20
The customer paid the account in full, less the return and allowance.
Solution
400
Chapter 6 Merchandising Transactions
6.5 Discuss and Record Transactions Applying the Two Commonly Used
Freight-In Methods
When you buy merchandise online, shipping charges are usually one of the negotiated terms of the sale. As a
consumer, anytime the business pays for shipping, it is welcomed. For businesses, shipping charges bring
both benefits and challenges, and the terms negotiated can have a significant impact on inventory operations.
Figure 6.13
Shipping Merchandise. (credit: “Guida Siebert Dairy Milk Delivery Truck tractor trailer!” by Mike
Mozart/Flickr, CC BY 2.0)
I F R S C O N N E C T I O N
Shipping Term Effects
Companies applying US GAAP as well as those applying IFRS can choose either a perpetual or periodic
inventory system to track purchases and sales of inventory. While the tracking systems do not differ | {"uploaded_via": "batch_uploader", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "batch_upload": true, "creator": "DocBook XSL Stylesheets V1.79.1"} |
29f9ea9c-95c2-4248-a6da-856e05f5ded2 | [
-0.029909886419773102,
0.02952568233013153,
-0.08341627568006516,
0.02369966357946396,
0.004295330960303545,
0.023215806111693382,
0.04101897031068802,
0.053974300622940063,
0.008070014417171478,
0.0518006905913353,
0.07705333828926086,
-0.019675446674227715,
-0.004862071946263313,
0.03676... | inventory system to track purchases and sales of inventory. While the tracking systems do not differ
between the two methods, they have differences in when sales transactions are reported. If goods are
shipped FOB shipping point, under IFRS, the total selling price of the item would be allocated between
the item sold (as sales revenue) and the shipping (as shipping revenue). Under US GAAP, the seller can
elect whether the shipping costs will be an additional component of revenue (separate performance
obligation) or whether they will be considered fulfillment costs (expensed at the time shipping as
shipping expense). In an FOB destination scenario, the shipping costs would be considered a fulfillment
activity and expensed as incurred rather than be treated as a part of revenue under both IFRS and US
GAAP.
Example
Wally’s Wagons sells and ships 20 deluxe model wagons to Sam’s Emporium for $5,000. Assume $400 of | {"uploaded_via": "batch_uploader", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "batch_upload": true, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
4ee1bd7c-871b-4461-9c50-541397f9bc18 | [
-0.05250035971403122,
0.04212512448430061,
-0.03224346041679382,
0.014105500653386116,
-0.018396014347672462,
0.0341276116669178,
-0.004588010720908642,
0.0804140642285347,
0.012379223480820656,
0.052285756915807724,
0.06091412901878357,
0.0056223394349217415,
-0.005277485121041536,
0.0429... | GAAP.
Example
Wally’s Wagons sells and ships 20 deluxe model wagons to Sam’s Emporium for $5,000. Assume $400 of
the total costs represents the costs of shipping the wagons and consider these two scenarios: (1) the
wagons are shipped FOB shipping point or (2) the wagons are shipped FOB destination. If Wally’s is
applying IFRS, the $400 shipping is considered a separate performance obligation, or shipping revenue,
and the other $4,600 is considered sales revenue. Both revenues are recorded at the time of shipping
and the $400 shipping revenue is offset by a shipping expense. If Wally’s used US GAAP instead, they
would choose between using the same treatment as described under IFRS or considering the costs of
shipping to be costs of fulfilling the order and expense those costs at the time they are incurred. In this
latter case, Wally’s would record Sales Revenue of $5,000 at the time the wagons are shipped and $400 as | {"uploaded_via": "batch_uploader", "file_size_mb": 156.7, "file_type": ".pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_name": "FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00"} |
cd24437b-28b1-4b6a-8d50-8d256a300581 | [
-0.0010769349755719304,
0.056024666875600815,
-0.052766285836696625,
0.03805484622716904,
0.048798155039548874,
0.005280953831970692,
0.0007413551793433726,
0.06261548399925232,
-0.004051646683365107,
0.01813896745443344,
0.06001105159521103,
0.014432600699365139,
0.0034252433106303215,
0.... | latter case, Wally’s would record Sales Revenue of $5,000 at the time the wagons are shipped and $400 as
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
401
shipping expense at the time of shipping. Notice that in both cases, the total net revenues are the same
$4,600, but the distribution of those revenues is different, which impacts analyses of sales revenue versus
total revenues. What happens if the wagons are shipped FOB destination instead? Under both IFRS and
US GAAP, the $400 shipping would be treated as an order fulfillment cost and recorded as an expense at
the time the goods are shipped. Revenue of $5,000 would be recorded at the time the goods are received
by Sam’s emporium.
Financial Statement Presentation of Cost of Goods Sold
IFRS allows greater flexibility in the presentation of financial statements, including the income statement. | {"file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "batch_upload": true, "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader"} |
c7956a4c-aba4-4aa7-95f7-c0ab45b937b5 | [
-0.011004115454852581,
0.05622238293290138,
0.008597522042691708,
0.02260255627334118,
0.0691160261631012,
0.02633025497198105,
0.034203510731458664,
0.07260510325431824,
0.02978927455842495,
0.008493504486978054,
0.002997507806867361,
-0.10187988728284836,
-0.03770775347948074,
0.05246870... | by Sam’s emporium.
Financial Statement Presentation of Cost of Goods Sold
IFRS allows greater flexibility in the presentation of financial statements, including the income statement.
Under IFRS, expenses can be reported in the income statement either by nature (for example, rent,
salaries, depreciation) or by function (such as COGS or Selling and Administrative). US GAAP has no
specific requirements regarding the presentation of expenses, but the SEC requires that expenses be
reported by function. Therefore, it may be more challenging to compare merchandising costs (cost of
goods sold) across companies if one company’s income statement shows expenses by function and
another company shows them by nature.
The Basics of Freight-in Versus Freight-out Costs
Shipping is determined by contract terms between a buyer and seller. There are several key factors to consider
when determining who pays for shipping, and how it is recognized in merchandising transactions. The | {"file_size_mb": 156.7, "producer": "Prince 11 (www.princexml.com)", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "file_name": "FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "title": "Principles of Accounting, Volume 1: Financial Accounting", "uploaded_via": "batch_uploader"} |
67d5e4d0-824f-47a3-9860-e537a0762a10 | [
-0.03080558590590954,
0.022825581952929497,
-0.013638571836054325,
-0.025514889508485794,
0.07496638596057892,
0.009213746525347233,
0.13632291555404663,
-0.02752573788166046,
0.0474722795188427,
-0.01609477959573269,
0.08224251866340637,
-0.049970533698797226,
0.0019290130585432053,
0.012... | when determining who pays for shipping, and how it is recognized in merchandising transactions. The
establishment of a transfer point and ownership indicates who pays the shipping charges, who is responsible
for the merchandise, on whose balance sheet the assets would be recorded, and how to record the transaction
for the buyer and seller.
Ownership of inventory refers to which party owns the inventory at a particular point in time—the buyer or
the seller. One particularly important point in time is the point of transfer, when the responsibility for the
inventory transfers from the seller to the buyer. Establishing ownership of inventory is important to determine
who pays the shipping charges when the goods are in transit as well as the responsibility of each party when
the goods are in their possession. Goods in transit refers to the time in which the merchandise is transported | {"uploaded_via": "batch_uploader", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "file_type": ".pdf", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting", "creationdate": "2019-04-24T10:32:54-05:00", "creator": "DocBook XSL Stylesheets V1.79.1", "file_name": "FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
e3cb0ad5-1e90-443b-85e0-c4a9b1fafc4c | [
-0.015673091635107994,
0.007118167355656624,
0.010721229948103428,
0.04182139411568642,
0.09010578691959381,
0.046447187662124634,
0.07746780663728714,
0.0058187758550047874,
-0.005895216017961502,
0.04072645306587219,
0.07520650327205658,
-0.04468218982219696,
0.03962699696421623,
0.00243... | the goods are in their possession. Goods in transit refers to the time in which the merchandise is transported
from the seller to the buyer (by way of delivery truck, for example). One party is responsible for the goods in
transit and the costs associated with transportation. Determining whether this responsibility lies with the
buyer or seller is critical to determining the reporting requirements of the retailer or merchandiser.
Freight-in refers to the shipping costs for which the buyer is responsible when receiving shipment from a
seller, such as delivery and insurance expenses. When the buyer is responsible for shipping costs, they
recognize this as part of the purchase cost. This means that the shipping costs stay with the inventory until it is
sold. The cost principle requires this expense to stay with the merchandise as it is part of getting the item
ready for sale from the buyer’s perspective. The shipping expenses are held in inventory until sold, which | {"uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055, "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "file_size_mb": 156.7} |
851754c3-697b-4fc8-8a32-5e4fd2301c84 | [
-0.011127032339572906,
0.019684284925460815,
0.03085690550506115,
-0.008825048804283142,
0.055885449051856995,
0.0471767820417881,
0.030715512111783028,
0.041560713201761246,
0.005977365653961897,
0.016963668167591095,
0.0665588453412056,
-0.04870815947651863,
0.0004806577926501632,
-0.056... | ready for sale from the buyer’s perspective. The shipping expenses are held in inventory until sold, which
means these costs are reported on the balance sheet in Merchandise Inventory. When the merchandise is
sold, the shipping charges are transferred with all other inventory costs to Cost of Goods Sold on the income
statement.
For example, California Business Solutions (CBS) may purchase computers from a manufacturer and part of
the agreement is that CBS (the buyer) pays the shipping costs of $1,000. CBS would record the following entry
to recognize freight-in.
402
Chapter 6 Merchandising Transactions
Merchandise Inventory increases (debit), and Cash decreases (credit), for the entire cost of the purchase,
including shipping, insurance, and taxes. On the balance sheet, the shipping charges would remain a part of
inventory.
Freight-out refers to the costs for which the seller is responsible when shipping to a buyer, such as delivery | {"upload_timestamp": "2026-02-07T07:23:08.167529", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00", "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader", "total_pages": 1055, "file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
9d7bc720-2bca-414f-bc15-1089305edaca | [
-0.0028163886163383722,
0.04370754957199097,
0.020941048860549927,
0.029527204111218452,
0.05849802494049072,
0.05180636793375015,
0.0732489675283432,
0.08029809594154358,
-0.028927283361554146,
0.011378916911780834,
0.04232969880104065,
-0.05731628090143204,
0.00973170530050993,
-0.011480... | inventory.
Freight-out refers to the costs for which the seller is responsible when shipping to a buyer, such as delivery
and insurance expenses. When the seller is responsible for shipping costs, they recognize this as a delivery
expense. The delivery expense is specifically associated with selling and not daily operations; thus, delivery
expenses are typically recorded as a selling and administrative expense on the income statement in the
current period.
For example, CBS may sell electronics packages to a customer and agree to cover the $100 cost associated
with shipping and insurance. CBS would record the following entry to recognize freight-out.
Delivery Expense increases (debit) and Cash decreases (credit) for the shipping cost amount of $100. On the
income statement, this $100 delivery expense will be grouped with Selling and Administrative expenses.
L I N K T O L E A R N I N G | {"title": "Principles of Accounting, Volume 1: Financial Accounting", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "producer": "Prince 11 (www.princexml.com)", "file_name": "FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "batch_upload": true, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
4227cc85-c770-4544-959b-c2511a866bd4 | [
0.022512763738632202,
0.008142447099089622,
-0.039536066353321075,
0.004363850690424442,
0.04230562597513199,
0.0186760351061821,
0.10855726897716522,
0.044517986476421356,
-0.030733861029148102,
0.07758056372404099,
0.027922213077545166,
-0.10259361565113068,
-0.029591398313641548,
-0.022... | income statement, this $100 delivery expense will be grouped with Selling and Administrative expenses.
L I N K T O L E A R N I N G
Shipping term agreements provide clarity for buyers and sellers with regards to inventory
responsibilities. Use the animation on FOB Shipping Point and FOB Destination (https://openstax.org/l/
50ShippingTerms) to learn more.
Discussion and Application of FOB Destination
As you’ve learned, the seller and buyer will establish terms of purchase that include the purchase price, taxes,
insurance, and shipping charges. So, who pays for shipping? On the purchase contract, shipping terms
establish who owns inventory in transit, the point of transfer, and who pays for shipping. The shipping terms
are known as “free on board,” or simply FOB. Some refer to FOB as the point of transfer, but really, it
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
403 | {"file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_name": "FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting", "total_pages": 1055, "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "file_size_mb": 156.7, "uploaded_via": "batch_uploader", "creationdate": "2019-04-24T10:32:54-05:00", "upload_timestamp": "2026-02-07T07:23:08.167529"} |
658f1d08-cf59-4762-9564-30cf54e8e2c0 | [
0.019763803109526634,
0.009323999285697937,
-0.009653701446950436,
-0.09328579157590866,
-0.012775242328643799,
-0.023643827065825462,
0.07884396612644196,
0.058016303926706314,
0.02823910117149353,
0.035056766122579575,
0.021078772842884064,
-0.08253256231546402,
0.024104032665491104,
-0.... | This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
403
incorporates more than simply the point at which responsibility transfers. There are two FOB considerations:
FOB Destination and FOB Shipping Point.
If FOB destination point is listed on the purchase contract, this means the seller pays the shipping charges
(freight-out). This also means goods in transit belong to, and are the responsibility of, the seller. The point of
transfer is when the goods reach the buyer’s place of business.
To illustrate, suppose CBS sells 30 landline telephones at $150 each on credit at a cost of $60 per phone. On
the sales contract, FOB Destination is listed as the shipping terms, and shipping charges amount to $120, paid
as cash directly to the delivery service. The following entries occur.
Accounts Receivable (debit) and Sales (credit) increases for the amount of the sale (30 × $150). Cost of Goods | {"producer": "Prince 11 (www.princexml.com)", "moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T07:23:08.167529", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "total_pages": 1055, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1"} |
9f5d0049-50e1-4626-9a28-47173e3485f0 | [
-0.005788399372249842,
-0.013014454394578934,
-0.04548265412449837,
-0.0666392520070076,
-0.006028044503182173,
0.04704371839761734,
0.09573959559202194,
0.08725457638502121,
0.009840770624577999,
0.07690151035785675,
0.043035805225372314,
-0.10428765416145325,
0.0014243705663830042,
-0.03... | as cash directly to the delivery service. The following entries occur.
Accounts Receivable (debit) and Sales (credit) increases for the amount of the sale (30 × $150). Cost of Goods
Sold increases (debit) and Merchandise Inventory decreases (credit) for the cost of sale (30 × $60). Delivery
Expense increases (debit) and Cash decreases (credit) for the delivery charge of $120.
Discussion and Application of FOB Shipping Point
If FOB shipping point is listed on the purchase contract, this means the buyer pays the shipping charges
(freight-in). This also means goods in transit belong to, and are the responsibility of, the buyer. The point of
transfer is when the goods leave the seller’s place of business.
Suppose CBS buys 40 tablet computers at $60 each on credit. The purchase contract shipping terms list FOB
Shipping Point. The shipping charges amount to an extra $5 per tablet computer. All other taxes, fees, and | {"uploaded_via": "batch_uploader", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "upload_timestamp": "2026-02-07T07:23:08.167529", "moddate": "2020-08-05T15:26:11-05:00", "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "batch_upload": true, "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
3086725d-4dbc-48b4-bb47-a8c7119df372 | [
0.0049933637492358685,
-0.0006823454168625176,
-0.04468299075961113,
-0.03353996202349663,
0.04795220494270325,
0.03214925900101662,
0.05966208130121231,
0.10224388539791107,
0.017419489100575447,
0.0857696682214737,
0.04797234758734703,
-0.07160790264606476,
-0.02020944282412529,
-0.02861... | Shipping Point. The shipping charges amount to an extra $5 per tablet computer. All other taxes, fees, and
insurance are included in the purchase price of $60. The following entry occurs to recognize the purchase.
Merchandise Inventory increases (debit) and Accounts Payable increases (credit) by the amount of the
purchase, including all shipping, insurance, taxes, and fees [(40 × $60) + (40 × $5)].
Figure 6.14 shows a comparison of shipping terms.
404
Chapter 6 Merchandising Transactions
Figure 6.14
FOB Shipping Point versus FOB Destination. A comparison of shipping terms. (attribution:
Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
T H I N K I T T H R O U G H
Choosing Suitable Shipping Terms
You are a seller and conduct business with several customers who purchase your goods on credit. Your
standard contract requires an FOB Shipping Point term, leaving the buyer with the responsibility for | {"uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "total_pages": 1055, "file_type": ".pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting"} |
b5a699db-71a2-41c3-9f55-0e8c472a813e | [
0.03552738204598427,
0.07065936923027039,
-0.035067252814769745,
-0.020125295966863632,
0.011370104737579823,
0.10250847786664963,
-0.03670156002044678,
0.07049182802438736,
-0.032685767859220505,
0.02027968317270279,
0.0035464668180793524,
-0.07160843908786774,
-0.07451900839805603,
-0.02... | standard contract requires an FOB Shipping Point term, leaving the buyer with the responsibility for
goods in transit and shipping charges. One of your long-term customers asks if you can change the
terms to FOB Destination to help them save money.
Do you change the terms, why or why not? What positive and negative implications could this have for
your business, and your customer? What, if any, restrictions might you consider if you did change the
terms?
6.6 Describe and Prepare Multi-Step and Simple Income Statements for
Merchandising Companies
Merchandising companies prepare financial statements at the end of a period that include the income
statement, balance sheet, statement of cash flows, and statement of retained earnings. The presentation
format for many of these statements is left up to the business. For the income statement, this means a
company could prepare the statement using a multi-step format or a simple format (also known as a single- | {"batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "creationdate": "2019-04-24T10:32:54-05:00", "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creator": "DocBook XSL Stylesheets V1.79.1", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "total_pages": 1055, "file_size_mb": 156.7, "uploaded_via": "batch_uploader"} |
3bf10111-8eab-4549-a278-db096d776fa9 | [
0.010283105075359344,
0.08071654289960861,
0.01240251399576664,
-0.05532405897974968,
0.001892413361929357,
0.030804885551333427,
-0.04803088307380676,
0.0682605504989624,
0.02946784347295761,
-0.012160289101302624,
-0.0015675130998715758,
-0.043004266917705536,
0.01203010231256485,
-0.050... | company could prepare the statement using a multi-step format or a simple format (also known as a single-
step format). Companies must decide the format that best fits their needs.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
405
Figure 6.15 Multi-Step versus Single-Step Formats. (credit: modification of “Balance Swing Equality” by
“Mediamodifier”/Pixabay, CC0)
Similarities and Differences between the Multi-Step and Simple Income Statement
Format
A multi-step income statement is more detailed than a simple income statement. Because of the additional
detail, it is the option selected by many companies whose operations are more complex. Each revenue and
expense account is listed individually under the appropriate category on the statement. The multi-step
statement separates cost of goods sold from operating expenses and deducts cost of goods sold from net
sales to obtain a gross margin. | {"batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055} |
f9a51dc1-1606-42b9-802e-26279b50151c | [
-0.0017632887465879321,
0.022551385685801506,
0.04096699133515358,
-0.0015288934810087085,
0.018615592271089554,
-0.03361927717924118,
0.07082218676805496,
0.023780887946486473,
0.0431550107896328,
-0.0036857856903225183,
0.04971092939376831,
-0.014201522804796696,
0.012781213968992233,
-0... | statement separates cost of goods sold from operating expenses and deducts cost of goods sold from net
sales to obtain a gross margin.
Operating expenses are daily operational costs not associated with the direct selling of products or services.
Operating expenses are broken down into selling expenses (such as advertising and marketing expenses) and
general and administrative expenses (such as office supplies expense, and depreciation of office equipment).
Deducting the operating expenses from gross margin produces income from operations.
Following income from operations are other revenue and expenses not obtained from selling goods or
services or other daily operations. Other revenue and expenses examples include interest revenue, gains or
losses on sales of assets (buildings, equipment, and machinery), and interest expense. Other revenue and
expenses added to (or deducted from) income from operations produces net income (loss). | {"batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "file_name": "FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "uploaded_via": "batch_uploader", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
9c810ff2-0851-4ec8-93cd-19b4ce954fd7 | [
0.016795555129647255,
0.10729467868804932,
0.05648917332291603,
-0.05277160555124283,
-0.046183302998542786,
0.058702241629362106,
-0.012090964242815971,
0.04842277243733406,
0.035340070724487305,
0.0013834532583132386,
-0.001196986879222095,
-0.06361941248178482,
0.038422591984272,
-0.066... | losses on sales of assets (buildings, equipment, and machinery), and interest expense. Other revenue and
expenses added to (or deducted from) income from operations produces net income (loss).
A simple income statement is less detailed than the multi-step format. A simple income statement combines
all revenues into one category, followed by all expenses, to produce net income. There are very few individual
accounts and the statement does not consider cost of sales separate from operating expenses.
Demonstration of the Multi-Step Income Statement Format
To demonstrate the use of the multi-step income statement format, let’s continue to discuss California
Business Solutions (CBS). The following is select account data from the adjusted trial balance for the year
ended, December 31, 2018. We will use this information to create a multi-step income statement. Note that the
statements prepared are using a perpetual inventory system.
406
Chapter 6 Merchandising Transactions | {"batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "uploaded_via": "batch_uploader", "title": "Principles of Accounting, Volume 1: Financial Accounting", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
d79cfad3-419e-465f-8eba-7ea53ab41110 | [
0.005955633241683245,
0.08883494883775711,
0.016955533996224403,
-0.05884585902094841,
-0.020506268367171288,
0.035821858793497086,
-0.054194267839193344,
0.10849044471979141,
0.02537228912115097,
-0.01658337377011776,
0.0026452047750353813,
-0.042962659150362015,
-0.015730228275060654,
-0... | statements prepared are using a perpetual inventory system.
406
Chapter 6 Merchandising Transactions
The following is the multi-step income statement for CBS.
Demonstration of the Simple Income Statement Format
We will use the same adjusted trial balance information for CBS but will now create a simple income
statement.
The following is the simple income statement for CBS.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
407
Final Analysis of the Two Income Statement Options
While companies may choose the format that best suits their needs, some might choose a combination of
both the multi-step and simple income statement formats. The multi-step income statement may be more
beneficial for internal use and management decision-making because of the detail in account information. The
simple income statement might be more appropriate for external use, as a summary for investors and lenders. | {"file_name": "FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "file_type": ".pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00", "total_pages": 1055, "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true} |
185148d1-3e60-4f1c-809a-3858895e92f9 | [
0.036288660019636154,
0.01324621681123972,
-0.03100944496691227,
-0.04636671394109726,
-0.03718268498778343,
0.015751371160149574,
-0.04742719978094101,
0.11311083287000656,
0.07060091197490692,
-0.008404342457652092,
0.0011569543275982141,
-0.0344238318502903,
-0.03470001369714737,
-0.059... | simple income statement might be more appropriate for external use, as a summary for investors and lenders.
From the information obtained on the income statement, a company can make decisions related to growth
strategies. One ratio that can help them in this process is the Gross Profit Margin Ratio. The gross profit
margin ratio shows the margin of revenue above the cost of goods sold that can be used to cover operating
expenses and profit. The larger the margin, the more availability the company has to reinvest in their business,
pay down debt, and return dividends to shareholders.
Taking our example from CBS, net sales equaled $293,500 and cost of goods sold equaled $180,000. Therefore,
the Gross Profit Margin Ratio is computed as 0.39 (rounded to the nearest hundredth). This means that CBS
has a margin of 39% to cover operating expenses and profit.
Gross profit margin ratio =
⎛
⎝$293,500 – $180,000⎞
$293,500
⎠
= 0.39, or 39%
T H I N K I T T H R O U G H | {"file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "creationdate": "2019-04-24T10:32:54-05:00", "moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "uploaded_via": "batch_uploader", "total_pages": 1055} |
3410c1dc-50b8-4d48-be7c-787e515af4a8 | [
0.08135520666837692,
0.10506387799978256,
-0.04574324190616608,
-0.011543159373104572,
-0.004364436026662588,
0.08174679428339005,
0.0015625505475327373,
0.10891349613666534,
0.04960343986749649,
0.006942505016922951,
-0.0023127347230911255,
-0.04878096282482147,
-0.0351090207695961,
-0.03... | has a margin of 39% to cover operating expenses and profit.
Gross profit margin ratio =
⎛
⎝$293,500 – $180,000⎞
$293,500
⎠
= 0.39, or 39%
T H I N K I T T H R O U G H
Which Income Statement Format Do I Choose?
You are an accountant for a small retail store and are tasked with determining the best presentation for
your income statement. You may choose to present it in a multi-step format or a simple income
statement format. The information on the statement will be used by investors, lenders, and management
to make financial decisions related to your company. It is important to the store owners that you give
enough information to assist management with decision-making, but not too much information to
408
Chapter 6 Merchandising Transactions
possibly deter investors or lenders. Which statement format do you choose? Why did you choose this
format? What are the benefits and challenges of your statement choice for each stakeholder group?
L I N K T O L E A R N I N G | {"batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00", "file_name": "FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_type": ".pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055} |
22c776c5-47c0-4ca9-a7e3-8b3503a7f21d | [
0.03849371150135994,
0.08014428615570068,
-0.009110771119594574,
-0.014426370151340961,
0.07382454723119736,
0.07107451558113098,
-0.024406027048826218,
0.07373957335948944,
0.04277228191494942,
-0.02422867901623249,
0.04686485230922699,
-0.04693327099084854,
-0.007702440023422241,
-0.0535... | format? What are the benefits and challenges of your statement choice for each stakeholder group?
L I N K T O L E A R N I N G
Target Brands, Inc. is an international retailer providing a variety of resale products to consumers. Target
uses a multi-step income statement format found at Target Brands, Inc. annual report
(https://openstax.org/l/50TargetAnnual) to present information to external stakeholders.
6.7 Appendix: Analyze and Record Transactions for Merchandise Purchases
and Sales Using the Periodic Inventory System
Some organizations choose to report merchandising transactions using a periodic inventory system rather
than a perpetual inventory system. This requires different account usage, transaction recognition,
adjustments, and closing procedures. We will not explore the entries for adjustment or closing procedures but
will look at some of the common situations that occur with merchandising companies and how these | {"upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "total_pages": 1055, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "batch_upload": true, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
bb802bc9-fe20-4935-97b0-ae935568e9dc | [
-0.015812784433364868,
0.06373374164104462,
-0.007039024494588375,
-0.08798819780349731,
0.013532516546547413,
0.009869069792330265,
0.04365582391619682,
0.02186935767531395,
0.016116974875330925,
-0.05416688323020935,
0.10475805401802063,
-0.020655769854784012,
0.05126957967877388,
-0.033... | will look at some of the common situations that occur with merchandising companies and how these
transactions are reported using the periodic inventory system.
Merchandise Purchases
The following example transactions and subsequent journal entries for merchandise purchases are recognized
using a periodic inventory system.
Basic Analysis of Purchase Transaction Journal Entries
To better illustrate merchandising activities under the periodic system, let’s return to the example of California
Business Solutions (CBS). CBS is a retailer providing electronic hardware packages to meet small business
needs. Each electronics hardware package contains a desktop computer, tablet computer, landline telephone,
and a 4-in-1 desktop printer with a printer, copier, scanner, and fax machine.
CBS purchases each electronic product from a manufacturer. The per-item purchase prices from the
manufacturer are shown.
Cash and Credit Purchase Transaction Journal Entries | {"title": "Principles of Accounting, Volume 1: Financial Accounting", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "moddate": "2020-08-05T15:26:11-05:00", "total_pages": 1055, "batch_upload": true, "uploaded_via": "batch_uploader", "file_type": ".pdf"} |
1013aefb-6cd6-4e3b-bdcf-7dfa16585e28 | [
-0.010027066804468632,
0.02041197381913662,
0.010971613228321075,
-0.11995293200016022,
-0.011102119460701942,
-0.02148008719086647,
0.055954061448574066,
0.08051565289497375,
0.046740446239709854,
0.03444230183959007,
0.03950650617480278,
-0.06758307665586472,
0.021172350272536278,
-0.082... | CBS purchases each electronic product from a manufacturer. The per-item purchase prices from the
manufacturer are shown.
Cash and Credit Purchase Transaction Journal Entries
On April 1, CBS purchases 10 electronic hardware packages at a cost of $620 each. CBS has enough cash-on-
hand to pay immediately with cash. The following entry occurs.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
409
Purchases-Packages increases (debit) by $6,200 ($620 × 10), and Cash decreases (credit) by the same amount
because the company paid with cash. Under a periodic system, Purchases is used instead of Merchandise
Inventory.
On April 7, CBS purchases 30 desktop computers on credit at a cost of $400 each. The credit terms are n/15
with an invoice date of April 7. The following entry occurs.
Purchases-Desktop Computers increases (debit) for the value of the computers, $12,000 ($400 × 30). Since the | {"file_type": ".pdf", "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T07:23:08.167529", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00"} |
a9b6d3e9-bcad-4b35-bb02-db6b48b96ab6 | [
-0.05356353521347046,
0.049266815185546875,
0.042920272797346115,
-0.11725173890590668,
-0.06524287909269333,
-0.0314018651843071,
0.016730329021811485,
0.0657426118850708,
0.04231170937418938,
0.10143352299928665,
0.037195559591054916,
-0.05346374586224556,
-0.001738367136567831,
-0.07363... | with an invoice date of April 7. The following entry occurs.
Purchases-Desktop Computers increases (debit) for the value of the computers, $12,000 ($400 × 30). Since the
computers were purchased on credit by CBS, Accounts Payable increases (credit) instead of cash.
On April 17, CBS makes full payment on the amount due from the April 7 purchase. The following entry occurs.
Accounts Payable decreases (debit) and Cash decreases (credit) for the full amount owed. The credit terms
were n/15, which is net due in 15 days. No discount was offered with this transaction. Thus the full payment of
$12,000 occurs.
Purchase Discount Transaction Journal Entries
On May 1, CBS purchases 67 tablet computers at a cost of $60 each on credit. Terms are 5/10, n/30, and invoice
dated May 1. The following entry occurs.
Purchases–Tablet Computers increases (debit) in the amount of $4,020 (67 × $60). Accounts Payable also | {"moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "batch_upload": true, "file_size_mb": 156.7} |
03041e22-4bf6-41f2-919c-9a7d8b3d170f | [
-0.0637471154332161,
0.05157339200377464,
0.04515337198972702,
-0.09258362650871277,
0.019522586837410927,
0.000826797157060355,
0.02018614299595356,
0.06969816237688065,
0.044690247625112534,
0.057015012949705124,
0.08348125964403152,
0.012352021411061287,
0.014922969043254852,
-0.0475529... | dated May 1. The following entry occurs.
Purchases–Tablet Computers increases (debit) in the amount of $4,020 (67 × $60). Accounts Payable also
increases (credit), but the credit terms are a little different than the earlier example. These credit terms include
a discount opportunity (5/10). This means that CBS has 10 days from the invoice date to pay on their account
to receive a 5% discount on their purchase.
410
Chapter 6 Merchandising Transactions
On May 10, CBS pays their account in full. The following entry occurs.
Accounts Payable decreases (debit) for the original amount owed of $4,020 before any discounts are taken.
Since CBS paid on May 10, they made the 10-day window, thus receiving a discount of 5%. Cash decreases
(credit) for the amount owed, less the discount. Purchase Discounts increases (credit) for the amount of the
discount ($4,020 × 5%). Purchase Discounts is considered a contra account and will reduce Purchases at the
end of the period. | {"upload_timestamp": "2026-02-07T07:23:08.167529", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "total_pages": 1055, "producer": "Prince 11 (www.princexml.com)", "moddate": "2020-08-05T15:26:11-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "batch_upload": true, "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1"} |
0fd98548-5f86-42c7-9498-250022d59624 | [
-0.06777794659137726,
0.0377451628446579,
0.056871674954891205,
-0.09851803630590439,
-0.06699266284704208,
0.02296384610235691,
0.0590781643986702,
0.07210894674062729,
0.055333785712718964,
0.03813648596405983,
0.043148223310709,
-0.0009285103296861053,
0.0434105210006237,
-0.07884129881... | discount ($4,020 × 5%). Purchase Discounts is considered a contra account and will reduce Purchases at the
end of the period.
Let’s take the same example purchase with the same credit terms, but now assume that CBS paid their
account on May 25. The following entry occurs.
Accounts Payable decreases (debit) and Cash decreases (credit) for $4,020. The company paid on their account
outside of the discount window but within the total allotted timeframe for payment. CBS does not receive a
discount in this case but does pay in full and on time.
Purchase Returns and Allowances Transaction Journal Entries
On June 1, CBS purchased 300 landline telephones with cash at a cost of $60 each. On June 3, CBS discovers
that 25 of the phones are the wrong color and returns the phones to the manufacturer for a full refund. The
following entries occur with the purchase and subsequent return.
Purchases-Phones increases (debit) and Cash decreases (credit) by $18,000 ($60 × 300). | {"producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "creator": "DocBook XSL Stylesheets V1.79.1", "batch_upload": true, "total_pages": 1055, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "uploaded_via": "batch_uploader"} |
cc4f65cc-0945-4614-94ad-10debcd289cf | [
-0.04148786887526512,
0.01887572929263115,
0.08561111986637115,
-0.08644295483827591,
-0.00990467332303524,
0.027126410976052284,
0.06665657460689545,
0.06634800136089325,
0.0011090909829363227,
0.02205856703221798,
0.04732075333595276,
0.011986039578914642,
0.02669086866080761,
-0.0978094... | following entries occur with the purchase and subsequent return.
Purchases-Phones increases (debit) and Cash decreases (credit) by $18,000 ($60 × 300).
Since CBS already paid in full for their purchase, a full cash refund is issued. This increases Cash (debit) and
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
411
increases (credit) Purchase Returns and Allowances. Purchase Returns and Allowances is a contra account and
decreases Purchases at the end of a period.
On June 8, CBS discovers that 60 more phones from the June 1 purchase are slightly damaged. CBS decides to
keep the phones but receives a purchase allowance from the manufacturer of $8 per phone. The following
entry occurs for the allowance.
Since CBS already paid in full for their purchase, a cash refund of the allowance is issued in the amount of $480
(60 × $8). This increases Cash (debit) and increases Purchase Returns and Allowances. | {"creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "creationdate": "2019-04-24T10:32:54-05:00", "producer": "Prince 11 (www.princexml.com)", "file_size_mb": 156.7, "batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "total_pages": 1055, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
a9ac4523-f800-42c1-aec8-95c7bd0d214e | [
-0.06097226217389107,
0.01573014259338379,
0.011896653100848198,
-0.0590425506234169,
-0.027113376185297966,
0.03638770431280136,
0.014078688807785511,
0.06428342312574387,
-0.05321548134088516,
0.023193133994936943,
0.059232018887996674,
-0.022639838978648186,
0.026847299188375473,
-0.065... | (60 × $8). This increases Cash (debit) and increases Purchase Returns and Allowances.
CBS purchases 80 units of the 4-in-1 desktop printers at a cost of $100 each on July 1 on credit. Terms of the
purchase are 5/15, n/40, with an invoice date of July 1. On July 6, CBS discovers 15 of the printers are damaged
and returns them to the manufacturer for a full refund. The following entries show the purchase and
subsequent return.
Purchases-Printers increases (debit) and Accounts Payable increases (credit) by $8,000 ($100 × 80).
Accounts Payable decreases (debit) and Purchase Returns and Allowances increases (credit) by $1,500 (15 ×
$100). The purchase was on credit and the return occurred before payment. Thus Accounts Payable is debited.
On July 10, CBS discovers that 4 more printers from the July 1 purchase are slightly damaged but decides to
keep them because the manufacturer issues an allowance of $30 per printer. The following entry recognizes
the allowance. | {"title": "Principles of Accounting, Volume 1: Financial Accounting", "moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "total_pages": 1055, "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_name": "FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "batch_upload": true, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9"} |
a5f3ed48-f835-4699-815d-3a40121f5c08 | [
-0.019110985100269318,
0.08188305795192719,
-0.00628221221268177,
-0.05061674490571022,
0.020117338746786118,
-0.0019958587363362312,
0.020742125809192657,
0.04481486976146698,
-0.04225444421172142,
0.01668780855834484,
0.08170445263385773,
-0.010253696702420712,
0.018520571291446686,
-0.0... | keep them because the manufacturer issues an allowance of $30 per printer. The following entry recognizes
the allowance.
Accounts Payable decreases (debit) and Purchase Returns and Allowances increases (credit) by $120 (4 × $30).
The purchase was on credit and the allowance occurred before payment. Thus, Accounts Payable is debited.
412
Chapter 6 Merchandising Transactions
On July 15, CBS pays their account in full, less purchase returns and allowances. The following payment entry
occurs.
Accounts Payable decreases (debit) for the amount owed, less the return of $1,500 and the allowance of $120
($8,000 – $1,500 – $120). Since CBS paid on July 15, they made the 15-day window and received a discount of
5%. Cash decreases (credit) for the amount owed, less the discount. Purchase Discounts increases (credit) for
the amount of the discount ($6,380 × 5%).
Summary of Purchase Transaction Journal Entries | {"creator": "DocBook XSL Stylesheets V1.79.1", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_name": "FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "total_pages": 1055, "uploaded_via": "batch_uploader", "file_size_mb": 156.7, "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "batch_upload": true, "moddate": "2020-08-05T15:26:11-05:00", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "upload_timestamp": "2026-02-07T07:23:08.167529", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
a9014453-3083-4421-ad45-1d09c0852dd4 | [
-0.017143459990620613,
0.07179317623376846,
-0.03598016873002052,
-0.0385461188852787,
-0.003768025664612651,
-0.028118712827563286,
-0.0015904013998806477,
0.07309986650943756,
0.013447018340229988,
0.05486869439482689,
0.07751796394586563,
-0.007975190877914429,
0.0527823269367218,
-0.04... | the amount of the discount ($6,380 × 5%).
Summary of Purchase Transaction Journal Entries
The chart in Figure 6.16 represents the journal entry requirements based on various merchandising purchase
transactions using the periodic inventory system.
Figure 6.16
Purchase Transaction Journal Entries Flow Chart. (attribution: Copyright Rice University,
OpenStax, under CC BY-NC-SA 4.0 license)
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
413
Y O U R T U R N
Recording a Retailer’s Purchase Transactions using a Periodic Inventory System
Record the journal entries for the following purchase transactions of a retailer, using the periodic
inventory system.
Dec. 3
Purchased $500 worth of inventory on credit with terms 2/10, n/30, and invoice dated
December 3.
Dec. 6
Returned $150 worth of damaged inventory to the manufacturer and received a full refund.
Dec. 9 | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "total_pages": 1055, "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "producer": "Prince 11 (www.princexml.com)", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "file_type": ".pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
fbd0ca8a-6a19-41b8-8757-11ad70a6e4c8 | [
-0.04070798680186272,
0.0280997846275568,
0.03051738440990448,
-0.10567226260900497,
-0.045676905661821365,
0.03587092086672783,
0.05312011390924454,
0.0705154538154602,
0.022324977442622185,
-0.013640896417200565,
0.08483847230672836,
-0.014712641015648842,
0.037779029458761215,
-0.067420... | December 3.
Dec. 6
Returned $150 worth of damaged inventory to the manufacturer and received a full refund.
Dec. 9
Customer paid the account in full, less the return.
Solution
Merchandise Sales
The following example transactions and subsequent journal entries for merchandise sales are recognized
using a periodic inventory system.
Basic Analysis of Sales Transaction Journal Entries
Let’s continue to follow California Business Solutions (CBS) and the sale of electronic hardware packages to
business customers. As previously stated, each package contains a desktop computer, tablet computer,
landline telephone, and 4-in-1 printer. CBS sells each hardware package for $1,200. They offer their customers
the option of purchasing extra individual hardware items for every electronic hardware package purchase. The
following is the list of products CBS sells to customers; the prices are per-package, and per unit.
414
Chapter 6 Merchandising Transactions | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_type": ".pdf", "producer": "Prince 11 (www.princexml.com)", "uploaded_via": "batch_uploader", "file_size_mb": 156.7, "file_name": "FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "creator": "DocBook XSL Stylesheets V1.79.1", "creationdate": "2019-04-24T10:32:54-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "batch_upload": true} |
11c3af7b-3f3c-4c3c-9b4a-a54525117b67 | [
-0.04622827097773552,
0.026809656992554665,
0.001974839251488447,
-0.10640447586774826,
-0.05677925422787666,
0.004600608721375465,
0.02374998666346073,
0.07755102962255478,
0.07213101536035538,
0.02581467106938362,
0.04992303252220154,
-0.05494517832994461,
0.06005308777093887,
-0.0875695... | following is the list of products CBS sells to customers; the prices are per-package, and per unit.
414
Chapter 6 Merchandising Transactions
Cash and Credit Sales Transaction Journal Entries
On July 1, CBS sells 10 electronic packages to a customer at a sales price of $1,200 each. The customer pays
immediately with cash. The following entries occur.
Cash increases (debit) and Sales increases (credit) by the selling price of the packages, $12,000 ($1,200 × 10).
Unlike the perpetual inventory system, there is no entry for the cost of the sale. This recognition occurs at the
end of the period with an adjustment to Cost of Goods Sold.
On July 7, CBS sells 20 desktop computers to a customer on credit. The credit terms are n/15 with an invoice
date of July 7. The following entries occur.
Since the computers were purchased on credit by the customer, Accounts Receivable increases (debit) and
Sales increases (credit) by the selling price of the computers, $15,000 ($750 × 20). | {"file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "file_size_mb": 156.7, "batch_upload": true, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_type": ".pdf", "producer": "Prince 11 (www.princexml.com)", "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader", "file_name": "FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
4e13bff0-6333-463d-8975-6703a6fe1b95 | [
-0.05302169919013977,
0.04588032886385918,
0.040438711643218994,
-0.09045469760894775,
-0.0002540048735681921,
-0.04504838585853577,
0.006304181180894375,
0.04726215824484825,
0.041137270629405975,
0.06726933270692825,
0.07627265900373459,
-0.03763296827673912,
0.07066410034894943,
-0.0765... | Since the computers were purchased on credit by the customer, Accounts Receivable increases (debit) and
Sales increases (credit) by the selling price of the computers, $15,000 ($750 × 20).
On July 17, the customer makes full payment on the amount due from the July 7 sale. The following entry
occurs.
Accounts Receivable decreases (credit) and Cash increases (debit) by the full amount owed. The credit terms
were n/15, which is net due in 15 days. No discount was offered with this transaction, thus the full payment of
$15,000 occurs.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
415
Sales Discount Transaction Journal Entries
On August 1, a customer purchases 56 tablet computers on credit. Terms are 2/10, n/30, and invoice dated
August 1. The following entries occur.
Accounts Receivable increases (debit) and Sales increases (credit) by $16,800 ($300 × 56). These credit terms | {"file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "file_size_mb": 156.7, "producer": "Prince 11 (www.princexml.com)", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "batch_upload": true, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf"} |
798e9e62-ed81-40fe-96b1-24c7f37c6331 | [
-0.09799689799547195,
0.050221651792526245,
0.024464424699544907,
-0.06294114142656326,
-0.0761360228061676,
0.0007851566188037395,
-0.036340974271297455,
0.08047650009393692,
0.05045700818300247,
0.03684986010193825,
0.07544634491205215,
-0.015164671465754509,
0.0229729525744915,
-0.05721... | August 1. The following entries occur.
Accounts Receivable increases (debit) and Sales increases (credit) by $16,800 ($300 × 56). These credit terms
are a little different than the earlier example. These credit terms include a discount opportunity (2/10). This
means that the customer has 10 days from the invoice date to pay on their account to receive a 2% discount on
their purchase.
On August 10, the customer pays their account in full. The following entry occurs.
Since the customer paid on August 10, they made the 10-day window, thus receiving a discount of 2%. Cash
increases (debit) for the amount paid to CBS, less the discount. Sales Discounts increases (debit) by the
amount of the discount ($16,800 × 2%), and Accounts Receivable decreases (credit) by the original amount
owed, before discount. Sales Discounts will reduce Sales at the end of the period to produce net sales. | {"batch_upload": true, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_type": ".pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "uploaded_via": "batch_uploader", "file_name": "FinancialAccounting-OP.pdf", "creationdate": "2019-04-24T10:32:54-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7} |
6d84afba-e18e-42c2-af16-625c9364810f | [
-0.09627415984869003,
0.042199332267045975,
0.07356564700603485,
-0.10667458176612854,
-0.05237080901861191,
0.01635882630944252,
0.0329485759139061,
0.05336064472794533,
0.050373468548059464,
0.014682533219456673,
0.06276077032089233,
0.018699491396546364,
0.060578156262636185,
-0.0807754... | owed, before discount. Sales Discounts will reduce Sales at the end of the period to produce net sales.
Let’s take the same example sale with the same credit terms, but now assume that the customer paid their
account on August 25. The following entry occurs.
Cash increases (debit) and Accounts Receivable decreases (credit) by $16,800. The customer paid on their
account outside of the discount window but within the total allotted timeframe for payment. The customer
does not receive a discount in this case but does pay in full and on time.
Sales Returns and Allowances Transaction Journal Entries
On September 1, CBS sold 250 landline telephones to a customer who paid with cash. On September 3, the
customer discovers that 40 of the phones are the wrong color and returns the phones to CBS in exchange for a
full refund. The following entries occur for the sale and subsequent return.
416
Chapter 6 Merchandising Transactions | {"uploaded_via": "batch_uploader", "batch_upload": true, "file_type": ".pdf", "creationdate": "2019-04-24T10:32:54-05:00", "file_name": "FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "title": "Principles of Accounting, Volume 1: Financial Accounting", "moddate": "2020-08-05T15:26:11-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "total_pages": 1055} |
27b03479-2ea0-4192-914f-96972a339cca | [
-0.07883577793836594,
0.04616103693842888,
0.08190825581550598,
-0.10728085786104202,
-0.03403010964393616,
0.00020879207295365632,
0.0272712092846632,
0.07163777947425842,
0.01368422619998455,
0.038776639848947525,
0.08604162931442261,
-0.00394338509067893,
0.007081209681928158,
-0.113995... | full refund. The following entries occur for the sale and subsequent return.
416
Chapter 6 Merchandising Transactions
Cash increases (debit) and Sales increases (credit) by $37,500 (250 × $150), the sales price of the phones.
Since the customer already paid in full for their purchase, a full cash refund is issued on September 3. This
increases Sales Returns and Allowances (debit) and decreases Cash (credit) by $6,000 (40 × $150). Unlike in the
perpetual inventory system, CBS does not recognize the return of merchandise to inventory. Instead, CBS will
make an adjustment to Merchandise Inventory at the end of the period.
On September 8, the customer discovers that 20 more phones from the September 1 purchase are slightly
damaged. The customer decides to keep the phones but receives a sales allowance from CBS of $10 per
phone. The following entry occurs for the allowance. | {"creationdate": "2019-04-24T10:32:54-05:00", "uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "producer": "Prince 11 (www.princexml.com)", "total_pages": 1055, "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_type": ".pdf", "moddate": "2020-08-05T15:26:11-05:00", "batch_upload": true, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_size_mb": 156.7, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting"} |
4b0879a6-3be5-4113-8315-aea4aa9d0b32 | [
-0.09249895066022873,
0.04825408384203911,
0.032823968678712845,
-0.08287271857261658,
-0.09607941657304764,
0.03767480328679085,
0.0006474382244050503,
0.06986048072576523,
-0.02985403873026371,
0.016223983839154243,
0.08261842280626297,
-0.021709591150283813,
0.0725722536444664,
-0.08296... | damaged. The customer decides to keep the phones but receives a sales allowance from CBS of $10 per
phone. The following entry occurs for the allowance.
Since the customer already paid in full for their purchase, a cash refund of the allowance is issued in the
amount of $200 (20 × $10). This increases (debit) Sales Returns and Allowances and decreases (credit) Cash.
A customer purchases 55 units of the 4-in-1 desktop printers on October 1 on credit. Terms of the sale are 10/
15, n/40, with an invoice date of October 1. On October 6, the customer discovers 10 of the printers are
damaged and returns them to CBS for a full refund. The following entries show the sale and subsequent
return.
Accounts Receivable increases (debit) and Sales increases (credit) by $19,250 (55 × $350), the sales price of the
printers. Accounts Receivable is used instead of Cash because the customer purchased on credit. | {"source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_size_mb": 156.7, "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "creationdate": "2019-04-24T10:32:54-05:00", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_type": ".pdf", "producer": "Prince 11 (www.princexml.com)", "creator": "DocBook XSL Stylesheets V1.79.1", "uploaded_via": "batch_uploader", "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_name": "FinancialAccounting-OP.pdf"} |
eff27de6-3564-497c-8dcf-9eb87ea9a627 | [
-0.04553402587771416,
0.04820720851421356,
0.015662504360079765,
-0.039457205682992935,
-0.007886667735874653,
0.020552536472678185,
0.01553551945835352,
0.014965122565627098,
-0.021493786945939064,
0.007799990940839052,
0.07593871653079987,
-0.012211247347295284,
0.05778117477893829,
-0.0... | printers. Accounts Receivable is used instead of Cash because the customer purchased on credit.
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
417
The customer has not yet paid for their purchase as of October 6. This increases Sales Returns and Allowances
(debit) and decreases Accounts Receivable (credit) by $3,500 (10 × $350).
On October 10, the customer discovers that 5 more printers from the October 1 purchase are slightly
damaged, but decides to keep them because CBS issues an allowance of $60 per printer. The following entry
recognizes the allowance.
Sales Returns and Allowances increases (debit) and Accounts Receivable decreases (credit) by $300 (5 × $60). A
reduction to Accounts Receivable occurs because the customer has yet to pay their account on October 10.
On October 15, the customer pays their account in full, less sales returns and allowances. The following
payment entry occurs. | {"file_size_mb": 156.7, "creationdate": "2019-04-24T10:32:54-05:00", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "producer": "Prince 11 (www.princexml.com)", "file_type": ".pdf", "uploaded_via": "batch_uploader", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "title": "Principles of Accounting, Volume 1: Financial Accounting"} |
45d74f98-a2dd-4c30-98da-2879e58a0942 | [
-0.020740080624818802,
0.06799706071615219,
-0.0038803168572485447,
-0.0713386982679367,
-0.03881143778562546,
-0.025971755385398865,
-0.015195381827652454,
0.07814345508813858,
0.010820993222296238,
0.026347702369093895,
0.045328833162784576,
-0.01887231320142746,
0.008112269453704357,
-0... | On October 15, the customer pays their account in full, less sales returns and allowances. The following
payment entry occurs.
Accounts Receivable decreases (credit) for the original amount owed, less the return of $3,500 and the
allowance of $300 ($19,250 – $3,500 – $300). Since the customer paid on October 15, they made the 15-day
window and receiving a discount of 10%. Sales Discounts increases (debit) for the discount amount ($15,450 ×
10%). Cash increases (debit) for the amount owed to CBS, less the discount.
Summary of Sales Transaction Journal Entries
The chart in Figure 6.17 represents the journal entry requirements based on various merchandising sales
transactions using a periodic inventory system.
418
Chapter 6 Merchandising Transactions
Figure 6.17
Journal Entry Requirements for Merchandise Sales Transaction Using a Periodic Inventory
System. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Y O U R T U R N | {"upload_timestamp": "2026-02-07T07:23:08.167529", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00", "batch_upload": true, "uploaded_via": "batch_uploader", "producer": "Prince 11 (www.princexml.com)", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_size_mb": 156.7, "title": "Principles of Accounting, Volume 1: Financial Accounting", "creationdate": "2019-04-24T10:32:54-05:00", "total_pages": 1055, "creator": "DocBook XSL Stylesheets V1.79.1", "file_name": "FinancialAccounting-OP.pdf", "file_type": ".pdf"} |
463401a3-31c0-4f15-b4fd-55f5b52b8bdd | [
-0.07100576907396317,
0.09675111621618271,
-0.022773392498493195,
-0.041050396859645844,
0.012566832825541496,
-0.007320283446460962,
0.03176405653357506,
0.034057583659887314,
0.0059090182185173035,
0.052551671862602234,
0.10417119413614273,
-0.0039956215769052505,
0.05173259973526001,
-0... | Journal Entry Requirements for Merchandise Sales Transaction Using a Periodic Inventory
System. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license)
Y O U R T U R N
Recording a Retailer’s Sales Transactions using a Periodic Inventory System
Record the journal entries for the following sales transactions of a retailer using the periodic inventory
system.
Jan. 5
Sold $2,450 of merchandise on credit (cost of $1,000), with terms 2/10, n/30, and invoice
dated January 5.
Jan. 9
The customer returned $500 worth of slightly damaged merchandise to the retailer and
received a full refund.
Jan. 14
Customer paid the account in full, less the return.
Solution
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
Chapter 6 Merchandising Transactions
419
420
Chapter 6 Merchandising Transactions
Key Terms
cash discount
provides a discount on the final price after purchase, if a retailer pays within a discount | {"file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "file_size_mb": 156.7, "batch_upload": true, "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "creator": "DocBook XSL Stylesheets V1.79.1", "upload_timestamp": "2026-02-07T07:23:08.167529", "producer": "Prince 11 (www.princexml.com)", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "moddate": "2020-08-05T15:26:11-05:00"} |
82db4ab8-8131-479b-ae70-859d31ebb551 | [
-0.027926787734031677,
0.03149562329053879,
-0.012754361145198345,
-0.03291632607579231,
0.04531681537628174,
0.014830809086561203,
0.10205944627523422,
0.055562615394592285,
0.011630220338702202,
0.037528857588768005,
0.10266157984733582,
-0.044778816401958466,
-0.014256582595407963,
-0.0... | 419
420
Chapter 6 Merchandising Transactions
Key Terms
cash discount
provides a discount on the final price after purchase, if a retailer pays within a discount
window, typically stated in days
cost of goods sold (COGS)
expense account that houses all costs associated with getting a product ready for
sale
FOB destination point
transportation terms whereby the seller transfers ownership and financial
responsibility at the time of delivery
FOB shipping point
transportation terms whereby the seller transfers ownership and financial responsibility
at the time of shipment
freight-in
buyer is responsible for when receiving shipment from a seller
freight-out
seller is responsible for when shipping to a buyer
goods in transit
time in which the merchandise is being transported from the seller to the buyer
gross margin
amount available after deducting cost of goods sold from net sales, to cover operating
expenses and profit
gross profit margin ratio | {"file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "title": "Principles of Accounting, Volume 1: Financial Accounting", "batch_upload": true, "producer": "Prince 11 (www.princexml.com)", "uploaded_via": "batch_uploader", "total_pages": 1055, "creationdate": "2019-04-24T10:32:54-05:00", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "creator": "DocBook XSL Stylesheets V1.79.1", "file_type": ".pdf", "file_size_mb": 156.7, "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "upload_timestamp": "2026-02-07T07:23:08.167529", "file_name": "FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00"} |
6cb22e90-2798-42bc-8a4b-fc6174419500 | [
0.007078887429088354,
0.0030433388892561197,
-0.01961575448513031,
-0.037667207419872284,
0.008262001909315586,
0.009502580389380455,
0.0013607676373794675,
0.043248873203992844,
0.0362592488527298,
-0.0180471520870924,
0.06863251328468323,
-0.05138975754380226,
0.04589404538273811,
-0.005... | gross margin
amount available after deducting cost of goods sold from net sales, to cover operating
expenses and profit
gross profit margin ratio
proportion of margin a company attains, above their cost of goods sold to cover
operating expenses and profit, calculated by subtracting cost of goods sold from total net revenue to
arrive at gross profit and then taking gross profit divided by total net revenues
gross purchases
original amount of the purchase without factoring in reductions for purchase discounts,
returns, or allowances
gross sales
original amount of the sale without factoring in reductions for sales discounts, returns, or
allowances
income from operations
gross margin less deductions for operating expenses
merchandising company
resells finished goods produced by a manufacturer (supplier) to customers
net income
when revenues and gains are greater than expenses and losses
net purchases | {"source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "moddate": "2020-08-05T15:26:11-05:00", "creationdate": "2019-04-24T10:32:54-05:00", "file_type": ".pdf", "file_name": "FinancialAccounting-OP.pdf", "batch_upload": true, "upload_timestamp": "2026-02-07T07:23:08.167529", "file_size_mb": 156.7, "creator": "DocBook XSL Stylesheets V1.79.1", "total_pages": 1055, "title": "Principles of Accounting, Volume 1: Financial Accounting", "uploaded_via": "batch_uploader", "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "producer": "Prince 11 (www.princexml.com)"} |
a79a86f9-6303-4335-8828-a1efcc509ae8 | [
-0.030359912663698196,
0.043898168951272964,
-0.002196568064391613,
-0.03673921525478363,
-0.013540713116526604,
-0.016070157289505005,
0.06509062647819519,
0.024438001215457916,
0.02323777601122856,
-0.0061479066498577595,
0.0992576852440834,
-0.004313654266297817,
0.028359947726130486,
-... | merchandising company
resells finished goods produced by a manufacturer (supplier) to customers
net income
when revenues and gains are greater than expenses and losses
net purchases
outcome of purchase discounts, returns, and allowances deducted from gross purchases
net sales
outcome of sales discounts, returns, and allowances deducted from gross sales
operating cycle
amount of time it takes a company to use its cash to provide a product or service and collect
payment from the customer
operating expenses
daily operational costs not associated with the direct selling of products or services
other revenue and expenses
revenues and expenses not associated with daily operations, or the sale of
goods and services
ownership of inventory
which party owns the inventory at a particular point in time, the buyer or the seller
periodic inventory system
updates and records the inventory account at certain, scheduled times at the
end of an operating cycle | {"creationdate": "2019-04-24T10:32:54-05:00", "producer": "Prince 11 (www.princexml.com)", "upload_timestamp": "2026-02-07T07:23:08.167529", "creator": "DocBook XSL Stylesheets V1.79.1", "file_type": ".pdf", "title": "Principles of Accounting, Volume 1: Financial Accounting", "file_size_mb": 156.7, "total_pages": 1055, "source_file": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "batch_upload": true, "file_name": "FinancialAccounting-OP.pdf", "uploaded_via": "batch_uploader", "file_hash": "89738e550d63820fbb3a833d14ab04029664bcb14dc631bb8a45f0af74d2d6b9", "source": "downloads\\business\\accounting\\FinancialAccounting-OP.pdf", "moddate": "2020-08-05T15:26:11-05:00"} |
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