SENIOR HIGH SCHOOL

Fundamentals of
Accountancy, Business and
Management 1
Quarter 4 - Module 1
Accounting Cycle of a
Merchandising Business

(DO_Q4_FABM1 _MODULE1) i
RESOURCE TITLE: Fundamentals of Accountancy, Business and Management 1
Alternative Delivery Mode
Quarter 4 – Module 1
First Edition, 2020

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Every effort has been exerted to locate and seek permission to use these materials from their
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over them.

Published by the Department of Education

Development Team of the Module

Writers: Rhoslyn M. Sagpang, Lawang Bato National High School

Reviewers: Darwin O. Fullo
Editors: Alfredo Galicia
Illustrator:
Layout Artist: Raphael A. Lopez
Management Team:
MELITON P. ZURBANO, Assistant Schools Division Superintendent (OIC-SDS)
FILMORE A. CABALLERO, CID Chief
JEAN A. TROPEL, Division EPS In-Charge of LRMS
Alfredo Galicia, Division EPS MAPEH

Printed in the Philippines by ________________________

Department of Education – National Capital Region – SDO VALENZUELA

Office Address: Pio Valenzuela St., Marulas, Valenzuela City

Telefax: (02) 292 – 3247
E-mail Address: sdovalenzuela@deped.gov.ph

ii
This module was designed and written with you in mind. It is here to help you master
the nature of Accounting. The scope of this module permits it to be used in many
different learning situations. The language used recognizes the diverse vocabulary
level of students. The lessons are arranged to follow the standard sequence of the
course. But the order in which you read them can be changed to correspond with
the textbook you are now using.

The module is divided into three lessons, namely:

• Lesson 1 – Nature of transactions in a merchandising business

After going through this module, you are expected to:

• Describes the nature of transactions in a merchandising business
• Records transactions of a merchandising business in the general and special journals
• Posts transactions in the general and subsidiary ledgers
• Prepares a trial balance
• Prepares adjusting entries
• Completes the accounting cycle of a merchandising business
• Prepares the Statement of Cost of Goods Sold and Gross Profit

Check the appropriate column (YES or NO) depending on your knowledge or

capability to perform based on the questions given.

Can you…. YES NO

1. describe the nature of transaction in a merchandising
business
2. journalize and posts transactions of a merchandising
business
3. prepare a trial balance
4. prepare adjusting entries
5. complete and prepare the complete accounting cycle for a
merchandising business

1 (DO_Q4_FABM1 _LESSON1)
 Lesson Accounting Cycle of a Merchandising
1 Business

This lesson provides information, activities, and exercises about accounting

cycle of a merchandising business. Upon completion of this lesson, you must be
able to identify nature of transaction and the complete accounting cycle of the
merchandising business.

Identify the following account titles by checking the appropriate column for
assets, liabilities, and owner’s equity.

Account Titles Assets Liabilities Owner’s

Equity
1. Account receivables
2. Notes payable
3. Owner’s, capital
4. Office supplies
5. Plant, property &
equipment

Accounting Cycle of a Merchandising Business

On this section, we will focus on the accounting concepts and principles for
merchandising businesses. We begin our discussion by highlighting the nature of
transactions in a merchandising business activity from service business.
A merchandising entity earns its revenue by selling products, called
merchandise or merchandising inventory.
A merchandising firm may be a wholesaler, who buys goods for resale to
retailers, or a retailer, which buys goods for resale to find customers. The goods
purchased and held for resale, whether wholesale or retail, are known as
merchandise and held apart from all other inventories
Income Measurement Process for a Merchandiser
Gross Profit = Sale – Cost of Goods Sold (COGS)
Net Income (Loss) = Gross Profit – Operating Expense
Merchandising businesses operating cycle (cash to cash) involves
a. buy merchandise inventory
b. sell inventory
c. obtain Accounts Receivable
d. receive cash

2 (DO_Q4_FABM1 _LESSON1)
 There are two methods of accounting for merchandise: PERPETUAL
INVENTORY method and PERIODIC INVENTORY method.
Under perpetual inventory method, cost of goods sold and ending inventory
may be determined from the accounting records without a physical counting of
goods. It requires a maintenance of records called stock cards which shows a
running balance of the inventory increases and decreases.
When a periodic inventory method is used, cost of goods sold, and the
ending inventory is determined by physically counting the items and multiplying the
number of items counted by its cost. Only the periodic inventory method will be
taken up in this self-learning module. The perpetual inventory method will be taken
up in higher accounting courses.

A. TERMS OF PURCHASE
Merchandise can be purchased on any of the following terms:
1. On Cash Basis – The buyer pays cash for the amount of merchandising
purchased.
Example: On June 1, 2019, Mr. Cruz bought merchandise worth P 50,000 and
paid cash, therefore.

Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
June 1 Purchases P 50,000
Cash P 50,000

2. On Credit Basis – The buyer receives the merchandise. The payment is on

a specific future date.
Example: On July 1, Mr. Cruz bought merchandise worth P 20,000 on account.
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
July 1 Purchases P 20,000
Account Payable P 20,000

3. On credit basis supported by a promissory note – The buyer receives the

merchandise. The payment is made through a signed promissory note.

Example: On August 1, Mr. Cruz purchased again P 30,000 worth of

merchandise and issued a promissory note.

3 (DO_Q4_FABM1 _LESSON1)
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
Aug 1 Purchases P 30,000
Note Payable P 30,000

4. With a down payment and the balance on account – The buyer receives
the merchandise and pays partially the amount of goods purchased. The
balance will be paid on a specific date.

Example: On September 1, he bought P 40,000 merchandise by paying P

10,000 down payment and the balance on account.

Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
Sept 1 Purchases P 40,000
Cash P 10,000
Accounts payable P 30,000

5. With a down payment and the balance is supported by a promissory

note – The buyer paid partially the amount of goods purchased and issued a
promissory note for the balance.
Example: He bought P 60,000 worth of merchandise by giving a P 20,000 down
payment and issued promissory note for the balance.
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
Oct 1 Purchases P 60,000
Cash P 20,000
Notes payable P 40,000

6. With a down payment and part of the balance supported by a promissory

note and the other part of account.
Example: On November 1, Mr. Cruz purchased P 50,000 worth of merchandise.
He gave a down payment of P 15,000, issued a P 20,000 promissory
note, and promised to pay the balance within ten days.

Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
June 1 Purchases P 50,000
Cash P 15,000
Note payable P 20,000
Account payable P 15,000

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 B. PURCHASE RETURN AND ALLOWANCES
When goods delivered to the buyer are not within the purchase order
specification, defective or damaged, the seller allows the buyer to return the
goods and makes the corresponding deductions from the customer’s account
or a corresponding cash refund is given. Sometimes the buyer is not required
to return the goods and the seller in that case made the necessary deduction
on his accounts which is called allowances.

Example 1: Mrs. Abby returned P 3,500 of the goods he purchased on cash basis
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
June Cash P 3,500
30
Purchase return and P 3,500
allowances

Example 2: On July 1, Mrs. Abby returned P 3,500 of the merchandise he

purchased on credit (if the purchase is on account).

Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
June 1 Account payable P 3,500
Purchase return and P 3,500
allowances

C. DISCOUNTS ON PURCHASES
There are two discounts granted to the purchases of the goods: the
cash discount and the trade discount.
1. Cash discount – is a certain percentage of the purchase price granted to the
buyer if the latter pays within a specified period from the date of the
purchase.
Example: On May 1, 2019, ABC Store brought P 20,000 worth of merchandise
from HACE Trading on credit. Terms: 2/10, 1/20, n/60

Discount No Discount

2/10, 1/20, n/60

Maturity date
Days

5 (DO_Q4_FABM1 _LESSON1)
 The terms 2/10, 1/20, n/60 mean that 2% discount is granted if the account
is paid within 10 days from the invoice date, or if not paid within the first 10 days,
1% discount is granted if paid within the next 10 days (10+10 = 20 days) from the
invoice date. Otherwise, if not paid within this period, account must be settled within
the next 40 days (20 + 40 = 60 days) from the invoice date without discount.

Suppose ABC Store paid its account on May 8, (8 days from the invoice date)

Computation:
Invoice price P 20,000
Less: Discount (.02 x P 20,000) 400
Amount of payment P 19,600
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
May 8 Account payable – HACE Trading P 20,000
Purchase discount P 400
Cash P 19,600

1. Trade discount – is a deduction from the catalog or list price granted to

purchaser of good. Unlike the cash discount, trade discount is not recorded
in the books of either the seller or buyer.
Example: The list price of product A is P 5 per unit. Mr. Cruz purchased 1,000
units and was granted a 10% trade discount. The amount of
purchase, therefor is as follows:
Purchase (1,000 units @ P 5/unit) P 5,000
Less: 10% trade discount 500

Amount of purchase P 4,500

The amount recorded in the books of both the buyer and the seller is P 4,500
The following are the advantages of granting trade discount:
1. It encourages customers to buy in large quantities
2. It enables the seller to establish different prices to different customers
3. It facilitates an easier changing of price without changing the printed catalog
price.

D. TERMS OF SALES
Sales is an income account which consists of gross proceeds from the merchandise
sold. It is recorded at selling price of good disposed of. The selling price consist of
the cost of goods and the gross profit or mark ups, or gross loss or mark downs.

Terms of Transactions Journal Entries Debit Credit

Sales
1. on cash RMS Trading sold Cash P 20,000
basis merchandise worth Sales P 20,000
P 20,000 cash to
Mr. Tan

6 (DO_Q4_FABM1 _LESSON1)
 2. on credit RMS Trading sold Account receivable P 15,000
basis merchandise on Sales P 15,000
account to Mrs. Que,
P 15,000
3. on credit Received a 10-days Note receivable P 13,000
basis 6% note for P 13,000 Sales P 13,000
supported by from A. Zobel for
a note merchandise sold
4. with down RMS Trading sold to Cash P 5,000
payment and E. Guan P 20,000 Account receivable P 15,000
the balance worth of Sales P 20,000
on account merchandise and
received P 5,000
down and the
balance on account
5. with down Sold merchandise to Cash P 5,000
payment and A. Garcia for Note receivable P 15,000
the balance P 40,000. Received Account receivable P 20,000
is supported P 5,000 down, 15- Sales P 40,000
by a day 6% not for
promissory P 15,000 and the
note. balance on account.

E. SALES RETURN AND ALLOWANCES

Occasionally, goods are returned for a refund, or an allowance (reduction in the
original price of the goods) is granted to a customer for defective or damaged goods.
Example: On September 1, 2019, Gabby’s Store sold merchandise worth
P 10,000 to Shara on account. Two days after, Shara returned P 500
worth of defective merchandise.
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
Sept 1 Account receivable P 10,000
Sales P 10,000

Sept 3 Sales return and allowances P 500

Account receivable P 500

F. DISCOUNT ON SALES
Usually, like purchase activity, customers are granted discounts for early payment
of accounts, this is called cash discount.

Example: On June 19, 2019, RMS Trading sold merchandise to Z. Lopez for
P20,000. Terms 2/10, n/20. On June 28, Z. Lopez paid his account.

7 (DO_Q4_FABM1 _LESSON1)
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
June Account receivable P 20,000
19
Sales P 20,000

June Cash P 19,600

28
Sales discount P 400
Account receivable P 20,000

Invoice Price P 20,000

Less: Discount (.02 x P 20,000) 400
Amount received P 19,600

G. ACCOUNTING FOR FREIGHT

The sale agreement should indicate whether the seller or the buyer is to
pay the cost of transporting the goods to the buyer’s place of business. The
most common arrangements for freight costs are FOB SHIPPING POINT and
FOB DESTINATION (FOB means Free On Board)
1. Freight In – or transportation in account is charge if payment is made
for the transportation of goods purchased. The amount is part of the
cost of goods sold.
Example: TGIF Trading paid P 1,500 for the shipment of merchandise
bought.
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
June 1 Freight In P 1,500
Cash P 1,500

1. Freight Out – or transportation out account is charge if payment is made

for the transportation of goods sold. Unlike freight in, this amount is an
operating expense of the business.

Example: NTC Merchandising sold merchandise to Z. Lopez and paid for

the delivery of goods sold, P 500.
Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
June 1 Freight Out P 500
Cash P 500

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SAMPLE TRANSACTIONS (Journalizing)
A. P. Tuazon purchased P 10,000 worth of merchandise on June 1, 2019. Give the
entries under the following terms of purchase.

a. Cash basis

b. Gave P 1,000 down payment and the balance is payable within 60 days

Date Account Title & Explanation F Debit Credit

2019
June 1 Purchase P 10,000
Cash P 10,000

June 1 Purchase P 10,000

Cash P 1,000
Accounts payable P 9,000

B. On September 5, 2019, G. Padilla sold P 28,000 merchandise to P. Rodriguez.

Record the particular sale transaction under the following terms of sale.
a. on cash basis
b. on account basis

Journal Entry:

Date Account Title & Explanation F Debit Credit

2019
Sept 5 Cash P 28,000
Sales P 28,000

Sept 5 Accounts receivable – P. Rodriguez P 28,000

Sales P 28,000

Instructions: Provide answers to the incomplete sentences.

After reading and discussing the lesson of accounting cycle for a
merchandising business,
I realize that
__________________________________________________________________________________
_________________________________________________________.
I feel that
__________________________________________________________________________________
_________________________________________________________.

9 (DO_Q4_FABM1 _LESSON1)
I need to learn that
__________________________________________________________________________________
_________________________________________________________.

A. TRUE or FALSE
Instructions: Read the statement carefully. Write TRUE if the statement is correct;
FALSE if it is correct. Write your answers on a separate sheet of
paper.
_______1. Purchase returns and allowances result from instances where the business
returns the merchandise purchased.
_______2. The term n/30 means that the net amount of invoice is due within 30 days
after the invoice date.
_______3. Defective goods returned by customers are credited to merchandise
account.
_______4. We debit the merchandise account for the purchase of office supplies.
_______5. Cash purchase of supplies increases the assets.
_______6. Trade discount is not recorded in the books of either the buyer or the seller.
_______7. Merchandise account is credited when defective goods are returned to the
supplier.
_______8. Periodic inventory method requires physical count of goods at the end of
each accounting period or as need arises.
_______9. Sales discount and purchased discount are cash discount.
______10. If merchandise costing P 3,000 is purchased on terms 3/15, n/30, the date
for paying the merchandise is 60 days after the date of purchase.
B. Illustrative Case. Journalizing of Merchandising Transactions
Required: Journalize the following transactions in a sheet of paper.
RMS Global Marketing had the following transactions in June, 2019. Assume
that the company uses the periodic inventory method.
June 1 Purchased merchandise for P 60,000 on credit, terms 2/10, n/30
4 Sold merchandise for P 10,000 on credit, terms 2/30, n/30
6 Returned P 5,000 of the merchandise purchased June 1 for credit.
9 Paid for merchandise purchased June 1, less return and discount.
10 Received payment from the customer of June 4, less discount.

10 (DO_Q4_FABM1 _LESSON1)
 Use the following accounts to record the transactions such as; Cash,
Purchases, Account Payable, Account Receivables, Sales, Sales Discounts, Sales
returns and allowances.

A. GLAMORE Marketing

Glamore Marketing had the following transaction in May.

Required:
1. Journalize the transactions under the periodic inventory system
2. Post the journal entries to the ledger using the following account titles:
Cash, Accounts receivables, Accounts payable, Sales, Sales discount,
Sales returns & allowances, Purchases, Purchase discounts and Purchase
returns & allowances.
3. Prepare the Trial Balance as May 31, 2019.

May 6 Purchased merchandise for P 50,000 on credit, terms 2/10, n/30

10 Sold merchandise for P 5,000 on credit, terms 2/30, n/30

12 Returned P 10,000 of the merchandise purchased on May 6 for credit.
15 Paid merchandise purchased dated May 6, less return and discount.
18 Received payment from the customer of May 10 with less discount.
22 Sold merchandise for P 10,000 on credits, term 2/10, n/30.

27 Customer of May 22 returned P 2,000 of merchandise for credit.

30 Purchased merchandise for P 20,000 on credit, terms n/30.

B. ROCCAB Distribution
Worksheet for Merchandising Business
using Periodic Inventory Method

Rocca Buenavista started his own business, ROCCAB DISTRIBUTORS. It

was organized as a sole proprietorship. It began operation on January 2, 2019.

Required:
1. Records transactions in the general and special journals
2. Post transactions in the general and subsidiary ledgers
3. Prepare a trial balance
4. Prepare adjusting entries
5. Complete the accounting cycle of a merchandising business

11 (DO_Q4_FABM1 _LESSON1)
 6. Prepare the Statement of Cost of Goods Sold and Gross Profit

The following Charts of Account are used for the transactions; Cash, Accounts
Receivables, Office Supplies, Office Equipment, Accounts Payable, Notes Payable,
Buenavista, Capital, Buenavista, Withdrawals, Sales, Sales Discount, Sales Return
& Allowances, Purchases, Purchase Discount, Purchase Return & Allowances,
Freight In, Freight Out, Salaries Expense, Rent Expense, Utilities Expense, Office
Supplies Expense and Salaries payable. The transactions for the month of January
2019 are follows:
Jan. 2 Buenavista invested P 100,000 to open ROCCAB Distributors
3 Purchased Office Equipment for P 20,000 cash
3 Bought merchandise on account from RMS Supply for P 5,000, FOB
Shipping Point, terms 2/10, n/30
4 Bought Office Supplies for cash P 1,200
4 Paid freight on January 3 purchase P 500
5 Sold merchandise on credit to Cruz Co., terms 2/10, n/30 FOB
Destination, P 28,000
6 Paid P250 freight on January 5 sale.
11 Returned merchandise to RMS Supply, and received a credit of P 800
12 Collected from sale to Cruz Co.
14 Bought merchandise on cash basis for P 18,000
15 Paid salaries of employees, P 2,500
17 Signed a promissory note for the cash borrowed from Metro Manila
Bank, P 15,000
18 Some of defect merchandise purchased last January 14 were returned
to supplier and received a refund of P 1,500
19 Bought merchandise from Macapuno, P 6,000, FOB Shipping Point,
terms 2/10, n/30
20 Paid freight on January 19 purchased, P 200
22 Sold merchandise to Fajardo for P 22,000
23 Accepted return merchandise from Fajardo amounting to P 2,000 and
issued a credit memo
25 Paid the following expenses: Salaries P 2,500, Rent P 3,000 and
Utilities P 5,000
26 Sold merchandise for P 15,000.
27 Collected half of the receivables from Fajardo. No discount allowed on
a partial collection.
28 Made a cash refund to customer for defective merchandise bought for
P 800
29 Paid a full payment to Macapuno
30 Buenavista withdrew cash from the business for personal use,
P 20,000

Data for Adjustment

Office supplies inventory taken at the closing of January 30, 2019, on hand
P 500. Salaries earned by employees but not paid were P 915. Using the information
provided, complete the following problem on a sheet.

12 (DO_Q4_FABM1 _LESSON1)
PICTURE COLLAGE
Instructions: Make a “picture collage” to describe the nature of buyer and seller in
merchandising business, use the following explanation as your guide.
Buyer’s Book
o Account payable and note payable are liabilities of the buyer. These represent
his obligation to the seller.
o Purchases is used to record the cost of merchandise bought
o Purchase returns and allowances is used to record cost of defective
merchandise returned to seller.
o Purchase discount is used to record the amount of discount granted by the
seller.
Seller’s Book
o Account receivable and Note receivable are assets of the seller that represent
his right to collect from the buyer.
o Sales is an income account used to record the selling price of merchandise
sold.
o Sales returns and allowances account is used to record merchandise returned
by the buyer.
o Sales discount is used to record the amount of discount granted to the buyer.
Rubrics for the additional activity

A = 100 B = 90 C = 80 D = 70
With a little The student
The artwork more effort, showed
The student
was brilliant the work average
Craftsmanship

showed below
and patiently could have craftsmanship,
average
done; it was been adequate, but
craftsmanship,
as good as outstanding not as good as
lack of pride in
hard work lacks the it could have
finished work.
could make it. finishing been, a bit
touches. careless
The project
was continued
until it was
complete as The student The student
the student worked hard finished the
could make it; and completed project, but it The student
gave it effort the project, could have did not finish
far beyond but with effort been improved the work
that required; it might have with more adequately
took pride in been effort; but
work going outstanding lacking finish
well beyond
Effort

the
requirements.
Source: Pinterest.ph/pin/188658671868906205/?nic_v

13 (DO_Q4_FABM1 _LESSON1)
II. ADDITIONAL ACTIVITIES

“Picture Collage”

III. ASSESSMENT (WORKSHEET)

A. GLAMORE MARKETING
1. Journalize the transactions under the periodic inventory system

2. Post the journal entries to the ledger

GLAMORE MARKETING
General Journal

_____________________________________

P/
Date Account Titles & Explanation Debit Credit
Ref.

14
Account Name: Account No.
Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

15
 Account Name: Account No.
Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

3. Prepare the Trial Balance as May 31, 2019.

GLAMORE MARKETING
Trial Balance
_______________________________________

Account Titles Debit Credit

16
B. ROCCAB DISTRIBUTION
1. Records transactions in the general/special journals

ROCCAB DISTRIBUTORS
General Journal
___________________________________

GENERAL JOURNAL PAGE no. _____

P/
Date Account Titles & Explanation Debit Credit
Ref.

17
2. Post transactions in the general or subsidiary ledgers

LEDGER
Account Name: Account No.
Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

18
Account Name: Account No.
Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

19
Account Name: Account No.
Balance
Date Explanation P.R. Debit Credit Credit
Debit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

Account Name: Account No.

Balance
Date Explanation P.R. Debit Credit
Debit Credit

20
 Account Name: Account No.
Balance
Date Explanation P.R. Debit Credit
Debit Credit

3. Prepare a trial balance

ROCCAB DISTRIBUTORS
Trial Balance
____________________________________

Account Titles Debit Credit

Cash P
Accounts Receivable
Office Supplies
Office Equipment
Accounts Payable
Notes Payable
Buenavista, capital
Buenavista, withdrawal
Sales
Sales Discount
Sales Return and Allowances
Purchases
Purchase Discounts
Purchase Return and Allowances
Transportation In
Transportation Out
Salaries Expense
Rent Expense
Utilities Expense
Totals P

4. Prepare adjusting entries

JOURNAL ENTRY FOR ADJUSTMENT

Date Account Titles & Explanation P/Ref. Debit Credit

21
 ROCCAB DISTRIBUTORS
Worksheet

Trial Balance Adjustment Adjusted Trial Balance Income Statement Balance Sheet
Cash
Accounts Receivables
Office Supplies
Office Equipment
Accounts Payable
Notes Payable
Buenavista, capital
Buenavista, withdrawal
Sales
Sales Discount
Sales Return and Allowances

22
Purchases
Purchase Discount
Purchase Return and Allowances
Freight In
Freight Out
Salaries Expense
Rent Expense
5. Complete the accounting cycle of a merchandising business

Utilities Expense

a. Supplies Expense
b. Salaries Expense

Net Income
6. Prepare the Statement of Cost of Goods Sold and Gross Profit

ROCCAB DISTRIBUTORS
Income Statement

Revenue Sales P
Gross Sales
Less: Sales discounts
Sales returns & allowances
Net sales

Cost of good sold

Inventory, January 1, 2019
Purchases
Less Purchase discount
Purchase returns & allowances
Net purchases P
Add: Transportation In/Out
Cost of goods available for sale
Less: Inventory, January 30, 2019
Cost of good sold
Gross profit P

Operating expenses:
Salaries expense
Rent expense
Utilities expense
Supplies expense
Total operating expense
Net Income P

23
References:
1. Arganda, A. & Herrero, C. (2011). Accounting Principle 2 Textbook/Workbook,
Fourth Edition: National Book Store, pp. 25-36, 57-66.

2. Cabrera, Ma. Elenita( 2017). Fundamentals of Accountancy, Business &

Management Volume 1: GIC Enterprises & Co., Inc. pp. 179-194.

3. CHED (2016). Teaching Guide for Senior High School. Fundamentals of

Accountancy, Business and Management I

For inquiries or feedback, please write or call:

Department of Education – SDO Valenzuela
Office Address: Pio Valenzuela Street, Marulas, Valenzuela City
Telefax: (02) 8292-4340
Email Address: sdovalenzuela@deped.gov.ph
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