Merchandising Accounts

Sales
Sales is an income account which is credited when goods or merchandise are sold
either for cash or an account basis.
Sales returns and allowance
Returns and allowance result from the return of any unsatisfactory merchandise. This
account is a deduction from sales and is debited when defective goods are returned by
the buyer.
Sales discount
A sales discount is an amount deducted from the regular price of goods that granted for
early payment. This is debited when an amount of discount is granted to the buyer. This
account can be deducted from sales or may be considered as other expenses.
Revenue from sales or Net sales
Consist of gross sales less returns, allowances, and discounts. Thus in the income
statement presentation.
Gross profit from sales
It is derived by subtracting cost of sales from net sales.
Purchases
Purchase account is the accumulated cost of all merchandise bought for resale during
an accounting period. It is debited when goods or merchandise are bought either on
account or on cash basis.
Purchase returns and allowances
This is a deduction from purchase. This is credited when defective merchandise are
returned to the supplier.
Purchase discount
This account is credited when the supplier granted the buyer an amount of discount.
This can be treated as deduction from purchases or as other income.

Freight in
This is debited if the business shoulders the payment for the delivery of goods bought.
This is added to purchases and a part of cost of sales.
Freight out
This is one of the operating expenses of the business. This is debited upon payment for
the delivery of goods sold.
Merchandise inventory
It is good for sale.
Cost of goods sold
Consist of the cost of merchandise on and at the beginning of the accounting period, net
cost of merchandise purchased including cost of transporting the good bought during
the period, and cost of unsold merchandise at the end of the accounting period.

COST OF GOODS SOLD

Triffany is a direct supplier of PUTO LECHE. When their company has special sale on
their items, she and her helpers made more quantity for future sales. She had
merchandise costing 15, 000php on hand at the end of September and merchandise
costing 12, 425php at the end of October. During the month she purchases 30, 00php of
merchandise, purchase of allowance were 4, 000php. Another 2, 000php total discount
in all her customers.

Cost of Goods:
Merchandise Inventory, Beginning

15, 000php

Add: Purchase

30, 000php

Total Goods Purchased

30, 000php

Less: Purchase Allowance

Discounts

4, 000php
2, 000php
6, 000php
24, 000php

Total Goods available for sales

39, 000php

Less: Merchandise Inventory, End

12, 425php

COST OF GOODS SOLD

26, 575php