Questions and Answers
What is recorded when goods are purchased from a supplier in a perpetual inventory system?
When a purchase return occurs, which account is credited?
How is a sales discount recorded?
Which account is affected when recording freight costs in a perpetual system?
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What is the primary effect of recording a purchase discount?
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What happens to the Cost of Goods Sold when a sales return is recorded?
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Which account is credited when recording a sale in a perpetual inventory system?
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In the event of a freight cost being incurred, which account is debited in a perpetual inventory system?
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What is the journal entry to record freight costs associated with purchases in a perpetual inventory system?
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How are purchase discounts recorded in a perpetual inventory system?
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What entry is made to record a sales return in a perpetual inventory system?
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Which account is credited when recording the sale of goods in a perpetual inventory system?
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In a periodic inventory system, which entry is made for the return of purchased goods?
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What is the main difference between a perpetual and periodic inventory system in terms of journal entries for sales?
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What is the correct journal entry for recording the sale discount given to a customer?
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What account is debited when recording the purchase of goods from a supplier in a perpetual inventory system?
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What journal entry should be made to record the purchase of merchandise on account from Mathew Trading Co. for P30,800?
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How would you record the sale of merchandise for P51,600?
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Which entry correctly accounts for the freight paid on the purchase?
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What should be recorded as a sales discount on the accounts receivable?
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After the physical inventory count, the remaining inventory value is reported as P17,200. What is the significance of this value?
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What entry should be made to account for the merchandise return from Mathew Trading Co. worth P400?
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What method is used by Salonga Marketing to manage their inventory system?
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Which of the following journal entries would NOT be required when Mr. Salonga withdrew cash from the business?
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Study Notes
Recording Journal Entries
- Accounts Payable is credited for purchase discounts recorded against incoming goods.
- Purchase returns utilize Accounts Payable to acknowledge goods returned to suppliers and reduce liabilities.
Sales Transactions
- Sales to customers are recorded by debiting Cash or Accounts Receivable and crediting Sales.
- Freight costs associated with sales are charged to Freight Out, reducing Cash or creating liabilities.
- Sales discounts apply to Accounts Receivable, reducing total receivable amounts when customers receive price reductions.
- Sales returns involve recording returns through Sales Returns and Allowances against Cash or Accounts Receivable.
Perpetual Inventory System Entries
- Merchandise Inventory increases when goods are purchased from suppliers, recorded by debiting the inventory account.
- Freight-in costs related to inventory purchases also increase Merchandise Inventory, ensuring cost tracking.
- Discounts on purchases decrease Accounts Payable, adjusting Inventory accounts accordingly.
- Purchase returns reduce both Accounts Payable and the Merchandise Inventory account.
Periodic Inventory System (Salonga Example)
- Initial investment into the business was P80,000 cash.
- Computer equipment purchased for P20,000 cash represents fixed asset acquisition.
- Merchandise purchased on account from Mathew Trading Co. for P30,800, with 2/10, n/30 terms indicating discount eligibility.
- Cash purchases of office supplies totaled P3,000; these are immediate expenses.
- Merchandise sales on account amounted to P58,500, with similar discount terms as purchases.
- Recorded returns from Mathew Trading Co. for P400, reducing liabilities.
- Immediate cash sales of merchandise totaled P51,600.
- Expenses included salary payments totaling P7,000, recurring cash outflows for wages.
- Financial activities included borrowing P12,000 from Banko and cash withdrawals by Mr. Salonga of P12,000.
- Utilities and rent payments required outflows of P1,138 and P3,000, respectively.
- A physical inventory count at month-end revealed a remaining inventory value of P17,200.
Important Dates in February Transactions
- Investment and purchases were made early in the month, establishing operational assets.
- Returns and sales were closely monitored, impacting both inventory and cash flow.
- It is essential to account for all expenses and liabilities for accurate financial reporting at the end of the month.
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Description
Test your knowledge on key accounting entries related to purchases and sales. This quiz covers various transactions, including discounts, returns, and freight costs. Perfect for accounting students looking to solidify their understanding of these concepts.
