FABM 1_Q4_Week 4_Espina_Jocelyn.pdf

Control No: ABM_FABM1_4 SLK for Fundamentals of Accountancy, Business, and Management 1 Grade 11 Quarter 4 Week 4 I. Preliminaries Competencies Records transactions of a merchandising business in the general and spe...

Control No: ABM_FABM1_4 SLK for Fundamentals of Accountancy, Business, and Management 1 Grade 11 Quarter 4 Week 4 I. Preliminaries Competencies Records transactions of a merchandising business in the general and special journals ABM_FABM11-IVe-j-36 Objectives Identify the transaction of merchandising business. Analyze the transaction of merchandising business. Journalize transaction in merchandising business in the general and special journal. Topic/Subject Accounting Cycle of a Merchandising Business: Step 2-Journalizing Matter Transaction Textbook Florenz C. Tugas, Herminigilda E. Salendrez, Joy S. Rabo. (2016). Fundamentals of Accountancy, Business and Management 1. Quezon City: Vibal Group, Inc. Joselito G. Florendo, Carlsberg S. Andres, Arthur P. Barrido, Jr.,Christopher B. Honorario, 2016. (2016). Teaching Guide: Fundamentals of Accountancy, Business, and Management 1. Quezon City: Commission on Higher Education. Materials Pen, Paper Copyrights DepEd Talisay Total Points 180 Date June 7 to 11, 2021 II. CONTENT MAP This topic will cover the following: Step 2 (Accounting Cycle) Journalizing Journalizing merchandising business Journalizing merchandising transaction using General Journal business transaction using Special Journal 1 III. CONTENT NOTES Step 2 Journalizing After analyzing transactions from source documents, we can now process to the next step which is journalizing. Journalizing is the process of recording transactions chronologically in a journal. The journal is also known as the book of original entry because it is where the first record of business transactions can be seen. From SLK Q3, Week 6, you have learned that there are now two major types of journal, namely, the general journal and the special journals. The merchandising transactions are recorded in both general and special journals. Through the use of specialized journals (such as those for sales, purchases, cash receipts, and cash disbursements) and the general journal, transactions and events are entered into the accounting records. These are called the books of original entry. Debits and Credits are an integral part of the journalization process. In accounting, debits or credits are abbreviated as DR and CR respectively. When to Debit and when to Credit: An increase in an asset account is called a debit and an increase in a liability or equity account is called a credit. Likewise, if we decrease an asset account we credit that account. On the other side of the equation, if we decrease a liability or equity account we debit those accounts. Rules on Debits and Credits The name of the account to be debited is always listed first. The debited account is listed on the first line with the amount in the left side of the register. The credited account is listed on the second line and is usually indented. The credited amount is recorded on the right side of the register. The total amount of debit should always equal the total amount of credit. INVENTORY SYSTEMS Maintaining inventory items is a unique set-up in a merchandising business. There are two methods of accounting for inventory, namely: Perpetual Inventory System and Periodic Inventory System. Merchandising entities may use either of the following inventory systems: 1. Perpetual System — Detailed records of the cost of each item are maintained, and the cost of each item sold is determined from records when the sale occurs. For example, a car dealership has separate inventory records for each vehicle. ❖ Record purchase of Inventory. ❖ Record revenue and record cost of goods sold when the item is sold. ❖ At the end of the period, no entry is needed except to adjust inventory for losses, etc. 2. Periodic System — Cost of goods sold is determined only at the end of an accounting period. This system involves: ❖ Record purchase of Inventory. ❖ Record revenue only when the item is sold. ❖ At the end of the period, you must compute cost of goods sold (COGS): Cost of Goods sold (COGS) computation 1. Determine the cost of goods on hand at the beginning of the accounting period (Beginning Inventory = BI), 2  2. Add it to the cost of goods purchased (COGP), 3. Subtract the cost of goods on hand at the end of the accounting period 4. (Ending Inventory = EI) Illustrated as follows: BI + COGP = Cost of Goods Available for - EI = COGS Sales Additional Considerations: Perpetual systems have traditionally been used by companies that sell merchandise with high unit values such as automobiles, furniture, and major home appliances. With the use of computers and scanners, many companies now use the perpetual inventory system. The perpetual inventory system is named because the accounting records continuously — perpetually —show the quantity and cost of the inventory that should be on hand at any time. The periodic system only periodically updates the cost of inventory on hand. A perpetual inventory system provides better control over inventories than a periodic inventory, since the records always show the quantity that should be on hand. Then, any shortages from the actual quantity and what the records show can be investigated immediately. Note: The periodic inventory system will be used in all illustrations of this chapter while the perpetual system will be included in the “enrichment” portion of this guide. PERIODIC INVENTORY SYSTEM Recording purchases and related transactions under the Periodic Inventory System PURCHASES OF MERCHANDISE: PERIODIC SYSTEM 1. When merchandise is purchased for resale to customers, the account, Purchases, is debited for the cost of goods purchased. 2. Like sales, purchases may be made for cash or on account (credit). 3. The purchase is normally recorded by the purchaser when the goods are received from the seller. Each credit purchase should be supported by a purchase invoice. A purchase invoice received by the buyer is actually a sales invoice or a charge invoice prepared by the supplier or vendor. Note that only purchases of merchandise are debited to the ‘Purchase’ account. Acquisition (purchases) of other assets: supplies, equipment, and similar items are debited to their respective accounts. TO ILLUSTRATE: Espina Computer Store started its operations on January 2, 2020. The store is located in Poblacion, Talisay City, Cebu. The owner invested PHP1,000,000 to start the business. GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 2, 2020 Cash P 1,000,000 Espina, Capital P 1,000,000 To record the initial investment of the owner 3  On January 3, 2020, Espina purchased 20 units of computers on account for PHP12,000 each. Upon delivery of the units, the supplier, Delta, Inc., issued Charge Invoice No. 100 to Espina. GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 3, 2020 Purchases P 240,000 Accounts Payable P 240,000 To record purchase of 20 units of computers at PHP12,000 per unit from Delta, Inc. as per Charge Invoice 100. PURCHASE RETURNS AND ALLOWANCES A purchaser may find the merchandise received to be unsatisfactory because the goods are: damaged or defective of inferior quality not in accord with the purchaser’s specifications The purchaser initiates the request for a reduction of the balance due through the issuance of a debit memorandum. The debit memorandum is a document issued by a buyer to inform a seller that the seller’s account has been debited because of unsatisfactory goods. A return of the merchandise (a deduction from the purchase price when unsatisfactory goods are kept) is shown by the entry where Accounts Payable is debited and Purchase Returns and Allowances is credited to show that the purchases was reduced with a return or an allowance. The Purchase Returns and Allowances account is a “contra purchases” account when merchandise is returned to a supplier. TO ILLUSTRATE: Out of the 20 computer units purchased last January 3, 2016, it was found after inspection on the same day that one (1) unit was damaged during shipment. Espina issued a debit memorandum (DM 01) and informed the supplier that it will return the one damaged item. GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 3, 2020 Accounts Payable P 12,000 Purchase Returns and Allowances P 12,000 To record return of 1 unit of computers worth PhP12,000 from Delta, Inc. as per DM 01 ACCOUNTING FOR FREIGHT COSTS The sales 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 two most common arrangements for freight costs are FOB SHIPPING POINT AND FOB DESTINATION. FOB Shipping Point: ❖ Goods placed free on board (FOB) the carrier by seller. ❖ Buyer pays freight costs. ❖ Freight-In is debited if buyer pays freight. 4  ❖ Cash is credited if the goods come on cash on delivery (COD), for example, and was paid immediately. Accounts Payable would be credited if on account. ❖ Ownership over the goods is transferred to the buyer once it is out of the premises of the seller. FOB Destination ❖ Goods placed free on board (FOB) at buyer’s business. ❖ Seller pays freight costs. ❖ Delivery Expense is debited if seller pays freight on outgoing merchandise to a buyer. This is an operating expense to the seller. ❖ Ownership over the goods is transferred to the buyer once the goods are delivered and received by the buyer. TO ILLUSTRATE: Assume the supplier of Espina is based in Manila. In order to bring the 20 computer units to Cebu, it will cost PHP3,500 to deliver the goods. If the terms is FOB Shipping Point, the entry to record, assuming Espina paid the common carrier in cash on January 4, 2020 is: GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 4, 2020 Freight-in P 3,500 Cash P 3,500 To record freight costs for the purchase of 20 units of computers If the terms is FOB Destination, no entry is recorded in the books of Espina. The PHP3,000 will be paid by the seller, in this case Delta, Inc. PURCHASE DISCOUNTS: ❖ Credit terms (specify the amount of cash discount and time period during which a discount is offered) may permit the buyer to claim a cash discount for the prompt payment of a balance due. If the credit terms show 2/10, n/30 means a 2% discount is given if paid within 10 days (called the discount period); otherwise, the invoice is due in 30 days. ❖ The buyer calls this discount a purchase discount. ❖ A purchase discount is normally based on the invoice cost less returns and allowances, if any. TO ILLUSTRATE The credit terms for the purchase of 20 computer units (total cost PHP240,000) is 2/10, n/30. This means that if Espina pays on or before January 13, 2020, it is entitled to a 2% discount, otherwise Espina will have to pay the full amount on or before February 4, 2020 (30 days after purchase). On January 10, 2020, Espina paid the account in full with Delta. GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 13, 2020 Accounts Payable P 240,000 Purchase Discount P 4,800 Cash P 235,200 To record full payment of Delta, Charge Invoice No. 100 with 2% 5  discount computed as PhP240,000 x 2% Assuming that instead of paying on January 10, 2020, Espina paid on February 4, 2020, thus forfeiting the 2% discount, the entry to record is: Journal Entry: GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Feb 4, 2020 Accounts Payable P 240,000 Cash P 240,000 To record full payment of Delta, Charge Invoice No. 100 Recording of sales and related transactions under the Periodic Inventory System SALES TRANSACTIONS: REVENUE ENTRIES FOR A MERCHANDISER ❖ Revenues are reported when earned in accordance with the revenue recognition principle, and in a merchandising company, revenues are earned when the goods are transferred from seller to buyer. ❖ All sales should be supported by a document such as a cash register tape (to provide evidence of cash sales) or cash receipt, or office receipt for cash sales, and charge invoice for credit sales, or sales on account. ❖ One entry is made with each sale: Debit — Accounts Receivable (if a credit sale) or Cash (if a cash sale) which increases assets for the sales amount Credit — Sales which increases revenues ❖ The sales account is credited only for sales of goods held for resale. Sales of assets not held for resale (such as equipment, buildings, land, etc.) are credited directly to the asset account. TO ILLUSTRATE: For the month of January, Espina made the following sale: January 10, 2020 Official Receipt (OR) No. 001 Sold two units for cash to Marie Cruz for PHP40,000 (PHP20,000 per unit), FOB Destination GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 10, 2020 Cash P 40,000 Sales P 40,000 To record OR No. 001 cash sale - Marie Cruz January 15, 2020 Charge Invoice (ChI) No. 001 Sold five units on account to Rafael Reyes for PHP100,000 (PHP20,000 per unit) with terms 3/10, n/30, FOB Shipping Point GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 15, 2020 Accounts Receivable P 100,000 Sales P 100,000 To record Charge Invoice No. 001 Rafael Reyes on account with terms 3/10, n/30 6 FREIGHT TERMS: FOB DESTINATION — SELLER PAYS FREIGHT ❖ An entry is made when seller pays the freight to deliver goods to a customer or buyer. If the buyer will pay for the freight, no entry is made. ❖ Debit — Freight-out and credit — Cash or Accounts Payable TO ILLUSTRATE: On January 10, 2020 Espina paid MM Express, PHP1,000 to deliver the two units to Marie Cruz. GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 10, 2020 Freight-out P 1,000 Cash P 1,000 To record delivery expenses Take note that no entry will be made regarding the sale to Rafael Reyes since the term is FOB Shipping Point. SALES RETURNS AND ALLOWANCES: ❖ Sales Returns result when customers are dissatisfied with merchandise and are allowed to return the goods to the seller for credit or a refund. ❖ Sales Allowances result when customers are dissatisfied, and the seller allows a deduction from the selling price. ❖ To grant the return or allowance, the seller prepares a credit memorandum to inform the customer that a credit has been made to the customer’s account receivable. ❖ Sales Returns and Allowances is a contra revenue account to the Sales account. A contra account is a reduction to a particular account. ❖ A contra account is used, instead of debiting sales, to disclose the amount of sales returns and allowances in the accounts. ❖ This information is important to management as excessive returns and allowances suggest inferior merchandise, inefficiencies in filling orders, errors in billing customers, and mistakes in delivery or shipment of goods. ❖ The normal balance of Sales Returns and Allowances is a debit. ❖ One entry is made with each sales return and allowance: The entry to record the sales return or allowance: ❖ Debit — Sales Return and Allowances which decreases revenues for the amount of the sale ❖ Credit — Accounts Receivable (if a credit sale) or Cash (if a cash sale) which decreases assets TO ILLUSTRATE: On January 16, 2020, Rafael Reyes returned one unit of the computers purchased last January 15, 2020 under Charge Invoice 001. The unit returned was in good condition. However, Rafael Reyes returned the unit because it is one unit more than what they need. The return was approved and accepted by Espina. The price will be deducted from the account of Rafael Reyes. GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 16, 2020 Sales Return and Allowances P 20,000 Accounts Receivable P 20,000 To record return of one unit of computers from Rafael Reyes under Charge Invoice 001 7 SALES DISCOUNTS 1. A sales discount is the offer of a cash discount to encourage customers to pay the balance at an earlier date. 2. An example of a discount term is commonly expressed as: 2/10, n/30, which means that the customer is given 2% discount if payment is made within 10 days. After 10 days there is no discount, and the balance is due in 30 days. 3. Sales Discounts is a contra revenue account with a normal debit balance. TO ILLUSTRATE: Assume that Espina purchased on cash, five units of computers at PHP12,000 per unit from a supplier on January 17, 2020. These units were subsequently sold to Jun Cruz on January 18, 2020 under Charge Invoice (ChI) No. 002 amounting to PHP90,000 (PHP20,000 per unit) with terms 2/10, n/30, FOB Shipping Point. On January 23, 2020, Cruz paid the said account in full. GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 17, 2020 Purchases P 60,000 Cash P 60,000 To record purchased on cash five units of computers # Jan 18, 2020 Accounts Receivable P 100,000 Sales P 100,000 To record sales on account under Charge Invoice No. 002 to Jun Cruz with terms 2/10, n/30 # Jan 23, 2020 Cash P 98,000 Sales Discount P 2,000 Accounts Payable P 100,000 To record collection of accounts receivable from Jun Cruz net of 2% sales discount # Notice in the entry on January 23, 2020 that the cash received from Jun Cruz was net of the 2% discount because he made the payment within the discount period. Take note that the discount period in this case was from January 19, 2020 to January 28, 2020 (10 days). GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jan 30, 2020 Cash P 100,000 Accounts Receivable P 100,000 To record collection of accounts receivable from Jun Cruz 8 JOURNALIZING IN GENERAL AND SPECIAL JOURNAL SPECIAL JOURNALS Some businesses encounter voluminous quantities of similar and recurring transactions, which may create congestion if these transactions are recorded repeatedly in a single day or monthly in the general journal. The use of special journals will eliminate this problem. The following are the four common types of special journals: 1. Sales Journal (SJ): used to record sale of merchandise on account 2. Purchase Journal (PJ): used to record purchase merchandise on account 3. Cash Receipt Journal (CRJ): used to record receipts of cash from whatever source 4. Cash disbursements journal (CDJ): used to record payments of cash for whatever source Let us journalize the transaction. The brackets in transactions refer to applicable source documents. CV is for Check voucher, SI is for sales invoice, and OR for official Receipt. We start off with purchase-related transactions which normally make use of the following Journals: PJ, CDJ, and GJ Date Transaction Jun 11 Purchased from Aubrey merchandise on cash basis, P15,000 (CV #005) 11 Paid freight on merchandise purchase from Aubrey, P1,000 (CV #006) 12 Purchased from Hanz merchandise worth P 20,000 on terms 2/20, n/30 13 Purchased from Maxene merchandise worth P25,000 on terms 50% downpayment, balance 2/10, n/30 (CV#008) 14 Returned P 1,000 worth of merchandise purchased from Aubrey (OR #004) 15 Returned P 1,500 worth of merchandise purchased from Hanz 16 Returned P 1,500 worth of merchandise purchased from Maxene 17 Paid P 2,000 in partial payment of account with Maxene (CV #010) 22 Paid in full account with Hanz (CV #012) 30 Paid in full account with Maxene (CV #013) Date Transaction Jun 11 Purchased from Aubrey merchandise on cash basis, P15,000 (CV #005) The journal entry is a debit to Purchases and a credit to Cash. Since its transaction involves payment of cash, this is recorded in the CDJ as follows: CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Purchases Cash Cr # Payable Dr in Discount (Dr) Cr Dr Cr Jun11 005 Aubrey 15,000 15,000 Notice that with the use of special column in the special journal such as “Purchases (Dr)” and “Cash (Cr)” columns, there is no nee to write the accounts debited and credited. This saves time in journalizing. 9  Date Transaction Jan Paid freight on merchandise purchase from Aubrey, P1,000 (CV #006) 11 CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight-in Purchases Cash # Payable Dr Dr Discount Cr (Dr) Cr Cr June 006 Freight 1,000 1,000 11 Co For this transaction, the “Paid to Column is the freight company and not supplier Aubrey. This is because the business pays the amount of freight to the freight company and not to the supplier. Date Transaction Jun Purchased from Hanz merchandise worth P 20,000 on terms 2/20, n/30 12 The June 12 transaction involves purchase of merchandise on account. This is recorded in the PJ as follows: PURCHASES JOURNAL PJ 1 Date Paid to Ref Purchases Accounts Payable Dr Cr. June 12 Hanz 20,000 20,000 Similar to the CDJ, the PJ simplifies the journalizing of a credit purchase transaction with the use of special journal Date Transaction 13 Purchased from Maxene merchandise worth P25,000 on terms 50% downpayment, balance 2/10, n/30 (CV#008) This transaction involves a credit to cash, so this is recorded in the CDJ CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Purchases Cash Cr # Payable Dr in Discount (Dr) Cr Dr Cr Jun13 006 Maxene 12,500 25,000 12,500 The amount credited to the Cash account is equal to 50% of P25,000, or P12,500. The amount credited to Accounts Payable is the difference between the P25,000 debit to Purchases and the P12,500 credit to Cash. 10  Date Transaction Jun Returned P 1,000 worth of merchandise purchased from Aubrey (OR #004) 14 This is only the purchase-related transaction that is recorded in a special journal other than the PJ or the CDJ. A return of purchased merchandise originally bought on cash basis increases the Cash account and the Purchase Returns and Allowances account. This is therefore recorded in the CRJ: CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Purchase Receipt from Dr Discount Receivable Cr Returns No. # Dr Dr and Allowances Cr Jun14 004 Aubrey 1,000 1,000 Date Transaction Jun Returned P 1,500 worth of merchandise purchased from Hanz 15 Although the original purchase transaction is recorded in the PJ, any purchase returns made is not automatically recorded in the same journal. The PJ is not used to record the above transaction since it does not involve purchase of merchandise on account. The CDJ is not used as well because there is no cash payment in the transaction. In this case where the special journals are not used, then the business has to record the transaction using the general journal. The entry in the GJ is as follows: GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jun 15 Accounts Payable – Hanz 1,500 Purchase Returns and Allowances 1,500 To record purchase returns Date Transaction Jun Returned P 1,500 worth of merchandise purchased from Maxene 16 This transaction is recorded in the GJ as follows GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jun 16 Accounts Payable – Maxene 1,500 Purchase Returns and Allowances 1,500 To record purchase returns Date Transaction Jun Paid P 2,000 in partial payment of account with Maxene (CV #010) 17 11  This transaction involves partial payment of account which is a debit to Accounts Payable and a credit to Cash for the amount paid. It is recorded in the CDJ as follows: CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Purchases Cash # Payable Dr in Discount Cr (Dr) Cr Dr Cr Jun 010 Maxene (2,000) 2,000 17 The amount in the “Accounts Payable (Dr) Cr” column is enclosed in parenthesis to signify a debit to Accounts Payable as shown in the column heading. This reflects that the normal balances of Accounts Payable ia credit and that to decrease the account involves a debit. To avoid confusion a separate column for “Accounts Payable Dr” and “Accounts Payable Cr” may be set up. On the other hand, notice that the amount in the “Cash Cr” column is not enclosed in parenthesis although there is a decrease in the Cash account. This is because the CDJ records transactions which involves payments of cash, so debit to cash cannot be found in the CDJ. Date Transaction Jun Paid in full account with Hanz (CV #012) 22 This transaction involves full payment of account with supplier within the discount period. The credit terms with Hanz are ‘2/10, n/30”. The merchandise was purchase last June 12 and the business is paid the account in full on June 22, so the business avails of cash discount. This is recorded in the CDJ as follows: CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Purchases Cash # Payable Dr in Discount Cr (Dr) Cr Dr Cr Jun 012 Hanz (18,500) 370 18,130 22 Let us first compute for the Accounts Payable balance. Based on the entry in the PJ on June 12, there is a credit of P20,000. Then, based on the entry on GJ, there was a return made on June 15 in amount of P1,500. No other transaction affected the Accounts Payable with B, so the remaining Accounts Payable is P18,500 (P20,000-P1,500) This amount is debited to Accounts Payable on June 22 in CDJ. Next let us compute for the amount of cash discount. The total purchases is P18,500 since there was a return of P1,500. The discount amount will be P 370 (18,500 x 2%). Date Transaction Jun Paid in full account with Maxene (CV #013) 30 12  This transaction is on full payment of account beyond the discount period. The credit terms with Maxene are “2/10, n/30” but the business paid the account in full on June 30, when the merchandise was originally purchased last June 13. This is recorded in the CDJ as follows: CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Purchases Cash # Payable Dr in Discount Cr (Dr) Cr Dr Cr Jun 013 Maxene (9,000) 9,000 30 The amount debited to Accounts Payable and credited to Cash is the remaining Accounts Payable prior to full payments. The June 13 purchase of merchandise resulted to a P12,500 credit in Accounts Payable in the CDJ. On June 16, Accounts Payable with Maxene was debited for P 1,500 in the GJ for the purchase return. On June 17, partial payment of P2,000 was debited to Account Payable in the CDJ. Prior to the full payment, the balance of Accounts Payable with Maxene is P 9,000 (P12,500 – P1,500 – P 2,000). This is the amount debited to Accounts Payable in CDJ on June 30. There is no cash discount since the business paid the account in full beyond the discount period. Thus, the amount of cash paid is equal to the debit to accounts Payable of P 9,000. Summary To summarize, the purchase-related transactions are shown in the general and special journals as follows: CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Purchases Cash # Payable Dr in Discount Cr (Dr) Cr Dr Cr Jun11 005 Aubrey 15,000 15,000 11 006 Freight 1,000 1,000 Co 13 006 Maxene 12,500 25,000 12,500 17 010 Maxene (2,000) 2,000 22 012 Hanz (18,500) 370 18,130 30 013 Maxene (9,000) 9,000 CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Purchase Receipt from Dr Discount Receivable Cr Returns No. # Dr Dr and Allowances Cr Jun 004 Aubrey 1,000 1,000 14 13  GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jun 15 Accounts Payable – Hanz 1,500 Purchase Returns and Allowances 1,500 To record purchase returns # 16 Accounts Payable – Maxene 1,500 Purchase Returns and Allowances 1,500 To record purchase returns Let us now journalize the sales-related transaction which are commonly recorded in the SJ, CRJ, and GJ Date Transaction Jun 15 Sold to Louise merchandise on cash basis, P15,000 (OR #005) 15 Paid freight on merchandise sold to Louise, P1,000 (CV #009) 16 Sold to Yvette Candice merchandise worth P 20,000 on terms 2/20, n/30 (SI #001) 17 Sold to Elias merchandise worth P30,000 on terms 50% downpayment, balance 2/10, n/30 (OR#006) 18 Received the return of P 1,000 worth of merchandise sold to Louise (CV #011) 19 Received the return of P 1,500 worth of merchandise sold to Yvette Candice 20 Received the return of P 1,500 worth of merchandise sold to Elias 11 Collected P 2,000 from Elias for partial payment of account (OR #007) 26 Collected in full account with Yvette Candice (OR #008) 30 Collected in full account with Elias (OR #009) Transaction 1 Date Transaction Jun 15 Sold to Louise merchandise on cash basis, P15,000 (OR #005) This transaction involves receipt of cash from the sale of merchandise. This involves a debit to Cash and its recorded in the CRJ as follows: CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Purchase Receipt from Dr Discount Receivable Cr Returns No. # Dr Dr and Allowances Cr 15 005 Louise 15,000 15,000 The one-line entry in the CRJ for the June 15 transaction shows that using special journal aside from general journal saves time in journalizing. 14 Transaction 2 Date Transaction 15 Paid freight on merchandise sold to Louise, P1,000 (CV #009) Since this transaction involves payment of cash, this is recorded in the CDJ under the “freight-out Dr” column to reflect the P 1,000 freight on merchandise sold. The entry in the CDJ as follows: CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Purchases Cash # Payable Dr out Discount Cr (Dr) Cr Dr Cr Jun 009 Freight 1,000 1,000 11 Co Transaction 3 Date Transaction Jun16 Sold to Yvette Candice merchandise worth P 20,000 on terms 2/20, n/30 (SI #001) This transaction involves sale of merchandise on account which is the only transaction recorded in the SJ. The entry in the SJ is as follows SALES JOURNAL PJ 1 Date Sales Paid to Ref Accounts Sales Invoice Receivable Cr. Dr No. June 16 001 Louise 20,000 20,000 Transaction 4 Date Transaction Jun17 Sold to Elias merchandise worth P30,000 on terms 50% downpayment, balance 2/10, n/30 (OR#006) This transaction involves receipt of cash and is recorded in the CRJ as follows: CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Purchase Receipt from Dr Discount Receivable Cr Returns No. # Dr Dr and Allowances Cr 17 006 Elias 15,000 15,000 30,000 In the case of CRJ or cash collection transaction, usual accounts affected are Cash, Sales Discount, Accounts Receivable, and Sales. Transaction 5 Date Transaction 18 Received the return of P 1,000 worth of merchandise sold to Louise (CV #011) 15  The original sale transaction with Louise is a cash sale. The return of sold merchandise by customer D therefore involves return of cash by the business. A special journal for “Sales Return and Allowances Dr” is set up to reflect the return of merchandise sold. This is recorded in the CDJ CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight-out Sales Cash # Payable Dr Dr Returns Cr (Dr) Cr and Allowances Dr Jun 011 Louise 1,000 1,000 18 Transaction 6 Date Transaction 19 Received the return of P 1,500 worth of merchandise sold to Yvette Candice Since this transaction does not involve cash and is not a purchase or sale of merchandise on account, then it is recorded in the GJ as follows: GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jun 19 Sales Returns and Allowances 1,500 Accounts Receivable-Yvette Candice 1,500 To record sales returns Transaction 7 Date Transaction 20 Received the return of P 1,500 worth of merchandise sold to Elias Similar to the June 19 transaction, this is recorded in the GJ as follows GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jun 20 Sales Returns and Allowances 1,500 Accounts Receivable-Elias 1,500 To record sales returns Transaction 8 Date Transaction 21 Collected P 2,000 from Elias for partial payment of account (OR #007) The partial collection is recorded in the CRJ as follows: CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Purchase Receipt from Dr Discount Receivable Cr Returns No. # Dr Dr and Allowances Cr 21 007 Elias 2,000 2,000 16 Transaction 9 Date Transaction 26 Collected in full account with Yvette Candice (OR #008) The full collection of customer accounts entered in the CRJ as follows: CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Purchase Receipt from Dr Discount Receivable Cr Returns No. # Dr Dr and Allowances Cr 26 008 Yvette 18,130 370 18,500 Candice The amount credited to the Accounts Receivable is the balance of customer account which is P18,500 (P20,000 of June 16 transaction minus P1,500 of June 19 transaction). Since the full collection was done within the discount period, there is sales discount to be recognized. The amount debited is equal to 2% of P18,500 or P370. The difference between these Accounts Receivable and Sales Discount amounts is debited to Cash. Transaction 10 Date Transaction 30 Collected in full account with Elias (OR #009) This transaction is full collection of customer account beyond the discount period. This is to entered in the CRJ as follows: CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Purchase Receipt from Dr Discount Receivable Cr Returns No. # Dr Dr and Allowances Cr 30 009 Elias 13,500 13,500 The amount credited to the Accounts Receivable is the balance of customer account which is P15,500 (P15,000 of June 17 transaction minus P1,500 of June 20 transaction). Since the full collection was done after the discount period, there is no sales discount to be recognized. 17 Summary To summarize, the sales transaction are shown in the general and special ledger as follows: CASH RECEIPT JOURNAL CRJ 1 Date Official Received Ref Cash Sales Accounts Sales Cr Other Receipt from Dr Discount Receivable Account No. # Dr Dr Cr Jun 005 Louise 10,000 10,000 15 17 006 Elias 15,000 15,000 30,000 21 007 Elias 2,000 2,000 26 008 Yvette 18,130 370 18,500 Candice 30 009 Elias 13,500 13,500 SALES JOURNAL PJ 1 Date Sales Paid to Ref Accounts Sales Invoice Receivable Cr. Dr No. June 16 001 Louise 20,000 20,000 CASH DISBURSEMENTS JOURNAL CDJ 1 Date CV Paid to Ref Accounts Purchases Freight- Sales Cash # Payable Dr out Returns Cr (Dr) Cr Dr and Allowances Cr Jun 009 Freight 1,000 1,000 11 Co 18 011 Louise 1,000 1,000 GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit Jun 19 Sales Returns and Allowances 1,500 Accounts Receivable-Yvette Candice 1,500 To record sales returns # 20 Sales Returns and Allowances 1,500 Accounts Receivable-Elias 1,500 To record sales returns 18 IV. ACTIVITIES Activity 1: Competency: Records transactions of a merchandising business in the general and special journals Date: June 7, 2021 HPS 10 Directions: Identify the statements given. Write the correct answer on the answer sheet provided. 1. The account used for merchandise that remained unsold 2. This type of business buys merchandise and sell the same at a profit. 3. Operating revenue account used by merchandising business. 4. This account is used under periodic system for merchandise bought for resale. 5. Contra-account used by seller that is granted to the buyer for paying early. 6. Account used by the seller to record transportation of merchandise/goods sold under the shipping term F.O.B destination 7. Contra-account used by the buyer for wrong specification or defective merchandise/goods returned to the seller. 8. Account used by the buyer to record transportation of goods bought under the shipping term F.O.B shipping point. 9. Contra-account used by the seller for wrong specification or defective merchandise returned by the buyer. 10. Contra-account used by the buyer when the seller grants them for paying early. Activity 2: Competency: Records transactions of a merchandising business in the general and special journals Date: March 30, 2021 HPS 15 Directions: Analyze the following transaction. Determine whether General Journal, Sales Journal, Purchases Journal, Cash Receipts Journal, Cash Payment Journal will be used in recording the transactions. Write the correct answer on the answer sheet provided. 1. Yvette Candice invested ₱1,000,000 cash in the business. 2. Purchased Computer Equipment on cash for ₱30,000. 3. Purchased supplies on cash for ₱3,000. 4. Purchased merchandise from 3M Merchandising for ₱30,000. Terms:3/10, n/30. 5. Purchased merchandise on cash for ₱20,000. 6. Paid the freight on merchandise bought above for ₱1,500. 7. Sold merchandise to various cash customers for ₱30,000. 8. Sold merchandise to Mr. Espina for ₱15,000. Terms:2/10, n/30. 9. Paid the freight on merchandise sold above for ₱500. 10. Paid the wages employees for ₱4,000. 11. Paid the account due to creditor. 12. Sold merchandise to various customers for ₱10,000. 13. Collected the account due from Mr. Espina. 14. Received defective merchandise from customers for ₱1,500. 15. Paid Utility bills for ₱4,000. 19 Activity 3: Competency: Records transactions of a merchandising business in the general and special journals Date: March 31, 2021 HPS: 65 Directions: Journalize the transactions in the General Journal, and Special Journals: Sales Journal, Purchases Journal, Cash Receipts Journal, Cash Payment Journal; and posts in the General Ledger and Subsidiary Ledgers. Write the correct answer on the answer sheet provided. Yvette Candice open a Convenient Store. The following are the transactions in December 2020: 1 Yvette Candice invested ₱1,000,000 cash in the business. 3 Purchased Computer Equipment on cash for ₱30,000. 4 Purchased supplies on cash for ₱3,000. 5 Purchased merchandise from 3M Merchandising for ₱30,000. Terms:3/10, n/30. 8 Purchased merchandise on cash for ₱20,000. 8 Paid the freight on merchandise bought above for ₱1,500. 10 Sold merchandise to various cash customers for ₱30,000. 11 Sold merchandise to Mr. Espina for ₱15,000. Terms:2/10, n/30. 12 Paid the freight on merchandise sold above for ₱500. 14 Paid the account due to creditor 15 Paid the wages employees for ₱4,000. 16 Sold merchandise to various customers for ₱10,000. 20 Collected the account due from Mr. Espina. 21 Received defective merchandise from customers for ₱1,500. 30 Paid Utility bills for ₱4,000. V. EVALUATION Date: March 31, 2021 Directions: Journalize the following transaction use General Journal HPS 90 1 Invested in the business cash, P150,000. 1 Purchased merchandise on account form Depot Wholesale Supply P60,000, terms 2/10, n/30. 2 Sold merchandise on account P45,000, terms 2/10, n/30. 3 Paid Freight on May 2 sale, P2,000. 4 Borrowed from bank P800,000 as additional capital. 5 Received credit memo from Depot Wholesale Supply for merchandise returned P2,000. 6 Purchased Delivery Van P500,000 in cash. 9 Received collections in full from customers billed on sales of P45,000 on May 2. 10 Paid Depot Wholesale Supply in full. 11 Purchased supplies for cash, P9,000. 12 Purchased merchandise for cash, P24,000. 20  15 Received refund for poor quality merchandise from supplier on cash purchase P2,300. 17 Paid employee salaries P12,000. 19 Purchased merchandise from Harlow Distributors P19,000, FOB shipping point, terms 2/10, n/30. 24 Sold merchandise for cash P108,000. 25 Purchased merchandise from Horicon Inc. P10,000; FOB destination, terms 2/10, n/30. 26 Paid Freight on May 19 purchase P2,300. 27 Paid Harlow distributors in full. 29 Made refunds to cash customers for defective merchandise P1,000. 30 Paid rent P20,000, utilities P4,500 and salaries P12,000. 30 Sold merchandise on account P26,000, terms n/30. 31 J. Carlos withdrew P50,000 in the business. Carlos Hardware's chart of accounts includes the following: 101 Cash in Bank 400 Income Summary 112 Accounts Receivable 401 Sales 120 Merchandise Inventory 412 Sales Returns and Allowances 126 Prepaid Expenses 414 Sales Discounts 130 Delivery Van 505 Purchases 201 Accounts Payable 506 Purchase Returns and Allowances 202 Loans Payable 507 Purchase Discount 301 J. Carlos, Capital 508 Freight-In 302 J. Carlos, Drawing 601 Freight Out 602 Salaries Expense 603 Rent 604 Utilities Expense VI. ANSWER KEY VII. REFERENCES Florenz C. Tugas, Herminigilda E. Salendrez, Joy S. Rabo. (2016). Fundamentals of Accountancy, Business and Management 1. Quezon City: Vibal Group, Inc. Joselito G. Florendo, Carlsberg S. Andres, Arthur P. Barrido, Jr.,Christopher B. Honorario, 2016. (2016). Teaching Guide: Fundamentals of Accountancy, Business, and Management 1. Quezon City: Commission on Higher Education. VIII. ADDITIONAL READING Study the 3rd Cycle of Accounting. Prepared by: 21 Name : Jocelyn I. Espina School : Talisay City National High School IX. FEEDBACK NOTES FABM 1 – QUARTER 4_WEEK 4 LEARNER’S FEEDBACK _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ PARENTS’/GUARDIANS’ FEEDBACK ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ____________________________ 22 X. ANSWER SHEET FABM 1 – QUARTER 4_WEEK 4 Activity 1: Name: ______________________________________ Year & Section: _______________ School: _____________________________________ Teacher: _________ Score: ______ 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Activity 2: Name: ______________________________________ Year & Section: _______________ School: _____________________________________ Teacher: _________ Score: ______ 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13 14. 23 15 Activity 3: Name: ______________________________________ Year & Section: _______________ School: _____________________________________ Teacher: _________ Score: ______ GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit 24 XI. EVALUATION Activity 1: Name: ______________________________________ Year & Section: _______________ School: _____________________________________ Teacher: _________ Score: ______ GENERAL JOURNAL DATE Account Title and Explanation Ref Debit Credit 25