Accounting II

Lecture 1
2020 - 2021

For Final Revision Reservations

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 Dr↑ Cr↓ Cr↑ Dr↓
Assets = Liabilities + Owners’ Equity
Current Assets +Accounts Payable +Owner’s Capital
+Cash +Notes Payable -Owner’s Drawings Dr↑ Cr↓
+Merchandise Inventory +Salaries and Wages Payable +Income Summary
+Supplies +Interest Payable Cr↑ Dr↓ Dr↑ Cr↓
+Accounts Receivable +Income Taxes Payable +Revenues -Expenses
+Notes Receivables +Mortgage Payable +Service -Advertising

+Interest Receivable +Unearned Service Revenue Revenue Expense

+Sales Revenue -Amortization
+Dividends Receivable +Unearned Rent Revenue
+Interest Expense
+Prepaid Insurance
Revenue -Bad Debt
+Prepaid Rent +Gain on Expense
-Allowance for Doubtful Disposal of -Cost of Goods

Accounts Cr↑ Dr↓ Plant Assets Sold

-Sales -Depreciation
Fixed Assets
Discounts Dr↑ Expense
+Land Cr↓ -Freight-Out
+Equipment -Income Tax
+Accumulated -Sales Returns Expense
and Allowances -Insurance
Depreciation— Equipment
Dr↑ Cr↓ Expense
+Buildings
-Interest-
+Accumulated
Expense
Depreciation— Buildings -Loss on
+Copyrights Disposal of

+Goodwill Plant Assets

-Maintenance
+Patents
and
Repairs
Expense
-Rent Expense
-Salaries and
Wages
Expense

1 Adapted By Dr Selim
 Chapter 1

Accounting for Merchandising Operations

1. Accounting for Sale Merchandise
1.1. Recording Sale Merchandise
1.2. Trade and Quantity Discounts
1.3. Sale Discount (Cash Discount)
1.4. Sales Returns and Allowances

2. Accounting for Purchases and Inventories

2.1. Perpetual Inventory System
2.2. Periodic Inventory System
2.3. Recording purchases discounts
2.4. Purchases Returns and allowances
2.5. Freight Costs (Transportation)
2.6. Multiple-step Income statement (vs) Single-Step Income Statement

2 Adapted By Dr Selim
Merchandising Operations

‫ في الشركات انها بتشتري البضاعة بسعر قليل عشان تبيعها بسعر أعلى بحيث‬Merchandise ‫فكرة عملية شراء ال‬
‫ وده بنحسبه عن طريق بنشوف‬Gross Profit ‫ أو‬Gross Margin ‫ واللي في الحالة ديه بنسميه‬Profit ‫تحقق‬
‫ أو اللي بنسميها تكلفة‬Cost of Goods Sold‫ و بين ال‬Sales Revenues ‫الفرق مابين اإليرادات بتاعت الشركة ال‬
.‫البضاعة اللي الشركة باعتها‬
:↓‫زي المثال ده‬

Simple Income Statement

Sales Revenue $ 100,000
Less: Cost of Goods Sold (60,000)
Gross Margin / Profit 40,000
Less: Operating Expenses (30,000)
Net Income $10,000
40,000 ‫ بيساوي‬Gross Profit ‫ بالتالي ال‬60,000 ‫ تكلفته عليها‬$100,000 ‫ ب‬Merchandise ‫الشركة باعت‬
‫ في صورة بسيطة‬...10,000 ‫ بيساوي‬Net Income‫ فهيكون ال‬30,000‫ ب‬Operating Exp ‫هتخصم منه‬
.Income Statement‫لل‬

3. Accounting for Sale Merchandise

‫ وال اتباع‬Cash ‫ ده اتباع مقابل‬Merchandise ‫ الزم تكون عارف ال‬Merchandise ‫مهم جداً لما الشركة تبيع‬
On Credit / On Account

Debit‫ زاد في ال‬Cash‫ يبقي طبيعي جداً حساب ال‬Cash ‫ ده مقابل‬Merchandise‫في حالة الشركة باعت ال‬
‫ زي ما هتشوف‬... Cash ‫ بدل ال‬Accounts Receivable ‫ يبقى الشركة هيجيلها‬On Credit ‫ولو الشركة باعت‬
.‫في المثال اللي جاي‬

Example 1 (To record Cash Sale)

The journal entry to record cash sale for $1,000 Merchandise is as follows
Dr Cr
Cash $1,000
Sales Revenue $1,000

Example 2 (To record Credit Sale)

The journal entry to record credit sale for $1,000 Merchandise is as follows
Dr Cr
Account Receivable $1,000
Sales Revenue $1,000

3 Adapted By Dr Selim
‫‪1.1.‬‬ ‫‪Trade and Quantity Discounts‬‬

‫أحينا ً الشركات بتعمل ‪ Discount‬على أسعار ال‪ Merchandise‬اللي بتبيعه وده بيكون في صورتين أو لسببين؛ يا أما ‪Trade‬‬
‫‪ Discount‬بنا ًء على عروض مختلفة‪ ،‬أو بيكون ‪ Quantity Discount‬بناء على الكمية ال ُمباعة (خصم على بيع الجملة)‪.‬‬

‫‪Example 3‬‬
‫‪X Company Offers 10% trade discount on its product. The product has a list price $100/unit.‬‬
‫‪The company Sold 50 units.‬‬

‫‪Required: Prepare the journal entries to record the above event.‬‬

‫‪Solution:‬‬
‫‪The sales Revenue (net of trade discount) = $100 x 50 x 90%= $4,500‬‬
‫‪To record sale of merchandise for cash (or on account):‬‬

‫‪Dr‬‬ ‫‪Cr‬‬
‫‪Cash/Account Receivable‬‬ ‫‪$4,500‬‬
‫‪Sales Revenue‬‬ ‫‪$4,500‬‬

‫‪1.2.‬‬ ‫)‪Sale Discount (Cash Discount‬‬

‫في الغالب اللي بيتم في ال ‪ Merchandising Firms‬أنها بتبيع بضاعتها ‪ On Credit‬لكن بتعمل خصومات‬
‫للمشترين اللي بيسددوا خالل فترة محددة زي نظام ‪ ،2/10, n/30‬واللي معناه أن الشركة هتديلك خصم ‪ %2‬لو سددت‬
‫فلوس البضاعة اللي عليك (كمشتري) في مدة أقصاها ‪ 10‬أيام‪ ،‬ولو سددت بعد ال ‪ 10‬أيام مش هتاخد أي خصم‪ .‬و‬
‫‪ n/30‬معناها أنك الزم تدفع إجمالي الفلوس اللي عليك في مدة أقصاها ‪ 30‬يوم‪.‬‬

‫‪1.2.1. The Gross Method of Recording Sale Discount‬‬

‫في ال‪ Gross Method‬عشان تسجل ال ‪ ،Sale Discount‬أول خطوة بتسجل ال ‪ Sale Revenue‬وال ‪ Receivables‬بال‬
‫‪ ،Gross Amount‬وفي تاني خطوة في حالة أن المشتري دفع فلوس ال‪ Merchandise‬في خالل فترة الخصم وليكن ال ‪10‬‬
‫أيام‪ ،‬بتسجل أن ال ‪ Cash‬زاد عندك في ال ‪ Debit‬بعد الخصم و بتسجل قيمة الخصم في ال ‪ Dr‬برضو و بتسجل ان ال‬
‫‪ Receivables‬قلت في ال ‪ Cr‬بإجمالي قيمتها‪.‬‬

‫وفي حالة أن المشتري دفع فلوس ال ‪ Merchandise‬بعد ال ‪ 10‬أيام فترة الخصم‪ ،‬مش بيستفاد بأي خصم وانت‬
‫كا‪ Merchandising Firm‬بتسجل فقط أن ال‪ Cash‬زاد عندك في ال ‪ Dr‬بإجمالي قيمته وال ‪ Receivables‬قلت ‪.Cr‬‬

‫‪4‬‬ ‫‪Adapted By Dr Selim‬‬

Example 4
On March1, X Company sold merchandise for $10,000 with the terms 2/10, n/30.

Required: Prepare the journal entries using the gross method, to:
a. Record the above transaction.
b. Record the payment under the following two independent cases:
1) Payment is made on March 6.
2) Payment is made on March 21.

Solution:
a. The journal entry to record the sale transaction (on credit) on March 1:

Dr Cr
Account Receivable $10,000
Sales Revenue $10,000

b. Recording Payment:
1) Payment is made on March 6.

Dr Cr
Cash 9,800
Cash Discount (Sales Discount) 200
Account Receivables $10,000

2) Payment is made on March 21.

Dr Cr
Cash $10,000
Account Receivables $10,000

5 Adapted By Dr Selim
1.3. Sales Returns and Allowances

(Sales Returns) ‫ بتسمح للمشتريين أنهم يرجعوا البضاعة اللي اشتروها‬Merchandising ‫بعض شركات ال‬
‫( لو شاريين‬Receivables Decrease( ‫ بتاعهم‬Credit‫لعيوب في البضاعة أو أي شئ آخر ويستردوا فلوسهم أو ال‬
‫ أو أنهم يحتفظوا بالبضاعة مايرجعوهاش للشركة ومايستردوش فلوسهم ولكن الشركة تعملهم تخفيض‬.On credit
.‫ المطلوب سداده‬Merchandise‫على سعر ال‬
.‫ ديه‬Transactions‫ وهو الحساب اللي بيتسجل فيه ال‬Sales Returns and Allowances ‫وده مفهوم ال‬

X Company
Partial Income Statement
For the year ended December 31,2015
Gross Sales Revenue $ XXX
Less: Sales Returns and Allowances (XXX)
Less: Sales Discounts (XXX)
Net Sales $XXX

Contra ‫ بيتعاملوا على أنهم‬Sales Discounts ‫ وال‬Sales Returns and Allowances ‫خد بالك أن ال‬
.Gross Sales‫ بيتخصمو من ال‬Accounts

Example 5
Assume that X company sold $10,000 of goods to Y company. Y company found $2000 of
these goods to be defective and returned them for credit.

Required: Prepare the journal entries made by X company to record the above transactions
and show how these transactions will appear in the income statement for the year ended
December 31, 2015.

Solution:
a. The journal entry to record sales:

Dr Cr
Account Receivables $10,000
Sales Revenue $10,000

b. The journal entry to record sales returns and allowances:

Dr Cr
Sales Returns and Allowances $2,000
Account Receivables $2,000

6 Adapted By Dr Selim
 c. Income Statement Presentation

X Company
Partial Income Statement
For the year ended December 31,2015
Gross Sales Revenue $ 10,000
Less: Sales Returns and Allowances (2,000)
Net Sales $8,000

4. Accounting for Purchases and Inventories

‫ في‬...‫ بتاعها‬Merchandise‫في الجزء األول من الشابتر كنت بتتعلم إزاي الشركة بتاعتك بتسجل مبيعات ال‬
Inventory ‫ و ال‬Merchandise‫الجزء التاني من الشابتر هتتعلم إزاي الشركة بتسجل عملية شراء ال‬
.‫الخاص بها‬
‫ بتاعها‬Inventory ‫في طريقتين مهمين جداً الشركة بتستخدمهم في تسجيل ال‬
The Perpetual and Periodic Inventory

2.1. Perpetual Inventory System

‫ بتاعها بتحدد قيمة‬inventory ‫ الشركة ديما ً وباستمرار لما بتبيع من ال‬Perpetual Inventory System ‫في ال‬
.‫ وبتسجلها في حساباتها‬Cost of Goods Sold ‫ال‬
‫ الشركة في نهاية الفترة المحاسبية فقط بتحدد وبتسجل قيمة ال‬Periodic inventory system ‫اما بالنسبة لل‬
.Cost of Goods Sold

7 Adapted By Dr Selim
Accounting for Perpetual Inventory System

‫ وعلى المقابل حساب ال‬Cr ‫ بيتسجل في ال‬Payables ‫ أو ال‬Cash ‫ ال‬Inventory ‫لما الشركة بتشتري‬
.Dr ‫ بيزيد في ال‬Merchandise Inventory
• Recording purchase of inventory:

Dr Cr
Merchandise Inventory $XXX
Cash/Account Payables $XXX

‫أو‬Cash ‫ وال‬Cr ‫ بيقل في ال‬Merchandise Inventory ‫ حساب ال‬،Inventory ‫ولما تيجي الشركة تبيع من ال‬
.Dr ‫ بتزيد في ال‬Receivables ‫ال‬
‫ يكون‬Balance of the merchandise inventory ‫ ال‬Perpetual Inventory System ‫والزم ديما ً في ال‬
.Cost of Goods Available ‫ ال‬reflect‫بي‬
• Recording sale of inventory:

Dr Cr
Cash/Accounts receivable $XXX
Sales Revenue $XXX
Cost of Goods Sold $XXX
Merchandise Inventory $XXX

Example 6
X Company started the year with a beginning inventory of $10,000. The following
Transactions took place during the period:

Date Sale Cost of Goods Sold Purchase

10/1 $10,000 7,500
15/1 $20,000
20/1 15,000 12,500
25/1 5,000
Required:

a. Prepare the journal entries to record the above transactions under

perpetual inventory.
b. Prepare the merchandise inventory and cost of goods sold accounts

8 Adapted By Dr Selim
Solution:
a. Recording the transactions:
1. Sale of $10,000 with cost of $7,000 on 10/1

Dr Cr
Cash/Accounts receivable $10,000
Sales Revenue $10,000
Cost of Goods Sold $7,500
Merchandise Inventory $7,500

2. Purchase of $20,000 merchandise on 15/1

Dr Cr
Merchandise Inventory $20,000
Cash/Account Payables $20,000

3. Sale of $15,000 with $12,500 on 20/1

Dr Cr
Cash/Accounts receivable $15,000
Sales Revenue $15,000
Cost of Goods Sold $12,500
Merchandise Inventory $12,500

4. Purchase of $5,000 on 25/1

Dr Cr
Merchandise Inventory $5,000
Cash/Account Payables $5,000

b. Required Accounts:
Merchandise Inventory
1/1 Balance $10,000 10/1 $7,500
15/1 20,000 20/1 12,500
25/1 5,000
31/1 15,000

Cost of Goods Sold

10/1 $7,500
20/1 12,500
31/1 20,000

9 Adapted By Dr Selim
2.2. Periodic Inventory System

‫ واألسهل في تسجيل‬Perpetual ‫ ألنه أقل تكلفة من ال‬Periodic inventory system ‫شركات كتيرة بتستخدم ال‬
‫ فقط في نهاية كل فترة محاسبية (نهاية كل شهر أو كل سنة) بدالً من تسجيلها‬COGS ‫ وال‬Ending Inventory ‫ال‬
.‫يوميا ً باستمرار‬

Accounting for Periodic Inventory System

‫ ومش بتسجل ال‬COGS‫ مش بتسجل ال‬Periodic inventory system ‫في التسجيل المحاسبي في ال‬
.Perpetual ‫ زي ما عملت في ال‬Merchandise Inventory ‫ في حساب ال‬Purchases

Example 7
X Company started the year with a beginning inventory of $10,000. The following
Transactions took place during the period:

Date Sale Cost of Goods Sold Purchase

10/1 $10,000 7,500
15/1 $20,000
20/1 15,000 12,500
25/1 5,000
Required:

a. Prepare the journal entries to record the above transactions under periodic
inventory.
b. Prepare the merchandise inventory and Purchases accounts

Solution
a. Recording the transactions

1. Sale of $10,000 with cost of $7,000 on 10/1

Dr Cr
Cash/Accounts receivable $10,000
Sales Revenue $10,000

2. Purchase of $20,000 merchandise on 15/1

Dr Cr
Purchases $20,000
Cash/Account Payables $20,000

10 Adapted By Dr Selim
 3. Sale of $15,000 with $12,500 on 20/1

Dr Cr
Cash/Accounts receivable $15,000
Sales Revenue $15,000

4. Purchase of $5,000 on 25/1

Dr Cr
Purchases $5,000
Cash/Account Payables $5,000

c. Required Accounts:
Purchases
15/1 $20,000
25/1 5,000

Merchandise Inventory
1/1 $10,000

Determining Cost of Goods Sold and Ending Inventory

Financial ‫ الزم تتحسب قبل ما تحضر ال‬Ending Inventory ‫ وال‬COGS ‫ ال‬Periodic System ‫في ال‬
.‫ بتاعت الشركة‬Statements
Ending Inventory ‫ وال‬COGS‫ لل‬Closing entries‫ و‬Adjusting ‫وفي نهاية الفترة المحاسبية بتعمل‬
.‫عشان تقفل حسابات الشركة‬

Example 8
Referring to Example 7; X Company started the year with a beginning inventory of
$10,000, Ending inventory of 15,000.

Date Sale Cost of Goods Sold Purchase

10/1 $10,000 7,500
15/1 $20,000
20/1 15,000 12,500
25/1 5,000

11 Adapted By Dr Selim
Required:

a. Calculate the Cost of Goods Sold.

b. Adjust inventory to ending balance.
c. Close cost of goods sold account.
d. Prepare the merchandise inventory, Purchases, cost of goods sold and
Income Summary accounts

Solution
a. To Calculate the Cost of Goods Sold.

Beginning Inventory $10,000

(+) Purchases 25,000
= Goods Available for Sale 35,000
(-) Ending Inventory (15,000)
=Cost of Goods Sold $20,000

b. To adjust inventory to ending balance.

Dr Cr
Ending Merchandise Inventory $15,000
Cost of goods Sold 20,000
Purchases 25,000
Beginning Merchandise Inventory $10,000

c. To close cost of goods sold

Dr Cr
Income Summary $20,000
Cost of goods Sold $20,000

d. Required Accounts
Merchandise Inventory
1/1 Balance $10,000 Adj. entry $10,000
Adj, entry 15,000
31/1 Balance 15,000

Purchases
15/1 $20,000 Adj. entry $25,000
25/1 5,000

12 Adapted By Dr Selim
 Cost of Goods Sold
Adj, entry $20,000 Closing entry $20,000

Income Summary
Closing entry $20,000

2.3. Issues involved in recording purchases

.Buyer‫ لل‬Seller ‫ تتنقل من ال‬Ownership‫ الزم تتسجل لما ال‬Cost of Purchases ‫ال‬
، Purchases Returns and Allowances‫ ؛‬Purchases Discounts ‫ بتشمل‬Cost of Purchases ‫ال‬
Freight Charges

2.3.1. Recording purchases discounts

‫ أو بال‬Gross Method ‫ سواء بال‬Sales Discounts ‫ بتتسجل بنفس طريقة ال‬Purchases Discounts ‫ال‬
.Net Method

‫ بتتسجل بقيمتهم اإلجمالية بدون أي‬Accounts Payables ‫ وال‬Purchases ‫ ال‬Gross Method ‫في ال‬
.‫خصومات‬
‫ بقيمة‬Credit ‫ هيتسجل في ال‬Purchases Discount ‫ حساب ال‬.Discount‫لو الشركة سددت في خالل فترة ال‬
.Dr ‫ هتقل وهتتسجل بقيمتهم اإلجمالية في ال‬A/P ‫ بقيمته بعد الخصم وال‬Cr‫ هيقل في ال‬Cash ‫ وال‬،‫الخصم‬

‫ هتقل بقيمتها‬A/P ‫ بقيمته اإلجمالية وال‬Cr‫ هيقل في ال‬Cash ‫ ال‬.Discount ‫لو الشركة سددت بعد فترة ال‬
.Dr ‫اإلجمالية في ال‬

Example 9
On March 1, X Company purchased merchandise costing $10,000 on account with the terms
2/10, n/30.

Required: Prepare the journal entries using the gross method, to:
a. Record the above transaction.
b. Record the payment under the following two independent cases:
3) Payment is made on March 6.
4) Payment is made on March 21.

Solution:
c. The journal entry to record the purchase transaction (on credit) on March 1:

Dr Cr
Purchase $10,000
Accounts Payable $10,000

13 Adapted By Dr Selim
 d. Recording Payment:
3) Payment is made on March 6.

Dr Cr
Accounts Payable 10,000
Purchase Discount 200
Cash $9,800

4) Payment is made on March 21.

Dr Cr
Accounts Payable $10,000
Cash $10,000

2.3.2. Purchases Returns and allowances

Sales Returns ‫ مشابه للتسجيل المحاسبي لل‬Purchases Returns and allowances ‫التسجيل المحاسبي لل‬
and allowances

1. Recording Purchases

Dr Cr
Purchases $XXX
Accounts Payable/Cash $XXX
2. Recording Purchases Returns and allowances

Dr Cr
Accounts Payable/Cash $XXX
Purchases Returns and allowances $XXX

2.3.3. Freight Costs (Transportation)

14 Adapted By Dr Selim
‫ لو الشركة بتستخدم‬Terms of sale‫ وده بيعتمد على ال‬Freight Costs ‫أول خطوة الزم تحدد مين اللي هيتحمل ال‬
‫ لحد‬Merchandise‫ فا ده معناه ان البائع ملزم انه يوصل ال‬FOB (Free on Board) – Destination ‫ال‬
.Freight ‫ هو اللي بيتحمل تكلفة ال‬Seller‫ بمعنى أن ال‬،‫المشتري‬
‫ فا ده معناه أن انا كمشتري اللي بروح اجيب‬FOB- Shipping Point ‫أما لو الشركة بتستخدم ال‬
.Freight Costs ‫ هو اللي بيتحمل ال‬Buyer ‫ بمعنى أن ال‬..Seller ‫ من ال‬Merchandise‫ال‬

COGS ‫ ومش بتتسجل لما احسب ال‬Selling Expenses ‫ بتعتبر‬Seller ‫ لما بيدفعها ال‬Freight Costs‫ال‬
‫ وبتضاف على‬Cost of Inventory‫ بتعتبر تكلفة جزء من ال‬Freight Costs‫ هو اللي بيدفع ال‬Buyer ‫أما لما ال‬
.COGS‫ال‬

Example 10 (FOB Shipping Point)

If Sauk Stereo (the buyer) pays Public Carrier Co. $150 for freight charges on May 6,

Required: Prepare the entry on Sauk Stereo’s books of freight on goods purchased.

Solution:
To record payment of freight on goods purchased on May 6.

Dr Cr
Merchandise Inventory $150
Cash $150

Example 11 (FOB Destination)

PW Audio Supply (the seller) pays Public Carrier Co. $150 for freight charges,

Required: Prepare the entry on PW Audio Supply of freight on goods sold.

Solution:
To record payment of freight on goods sold

Dr Cr
Selling Expenses $150
Cash $150

2.4. Multiple-step Income statement (vs) Single-Step Income Statement

Single-Step Income ‫ بيكون فيها تفاصيل وبيانات أكتر عن ال‬Multiple-step Income statement‫ال‬
.Statement

Multiple-step Income statement

15 Adapted By Dr Selim
16 Adapted By Dr Selim
Single-step Income statement

Example 12
a. On November 2, Z-Mart purchased $1,200 of merchandise inventory on account, credit
terms are 2/10, n/30
b. On November 12, Z-Mart paid the amount due on the purchase of November 2.
c. On November 15, Z-Mart (buyer) issues a $300 debit memorandum for an allowance
from Trex for defective merchandise.
d. Z-Mart purchased merchandise on terms of FOB shipping point. The transportation
charge is $75.
e. On November 3, Z-Mart sold $2,400 of merchandise on credit. The merchandise has a
cost basis to Z-Mart of $1,600.
f. Recall Z-Mart’s sale for $2,400 that had a cost of $1,600. Assume the customer returns
part of the merchandise. The returned items sell for $800 and cost $600.
g. Z-Mart received the full amount less 3% discount.

Required: Prepare the Journal entry.

Solution:
a. On November 2, Z-Mart purchased $1,200 of merchandise inventory on account, credit
terms are 2/10, n/30
Periodic method Perpetual method
Dr Cr Dr Cr
Purchases 1,200 Merchandise inventory 1,200
Accounts Payables 1,200 Accounts Payable 1,200

17 Adapted By Dr Selim
b. On November 12, Z-Mart paid the amount due on the purchase of November 2.
Periodic method Perpetual method
Dr Cr Dr Cr
Accounts Payable 1,200 Accounts Payable 1,200
Purchase Discounts 24 Merchandise Inventory 24
Cash 1,176 Cash 1,176

c. On November 15, Z-Mart (buyer) issues a $300 debit memorandum for an allowance from
Trex for defective merchandise.

Periodic method Perpetual method

Dr Cr Dr Cr
Accounts Payable 300 Accounts Payable 300
Purchase returns and allowances 300 Merchandise Inventory 300

d. Z-Mart purchased merchandise on terms of FOB shipping point. The transportation charge
is $75.

Periodic method Perpetual method

Dr Cr Dr Cr
Transportation-in 75 Merchandise Inventory 75
Cash 75 Cash 75

e. On November 3, Z-Mart sold $2,400 of merchandise on credit. The merchandise has a cost
basis to Z-Mart of $1,600
Periodic method Perpetual method
Dr Cr Dr Cr
Accounts Receivable 2,400 Accounts Receivable 2,400
Sales 2,400 Sales 2,400
Cost of goods sold 1,600
Merchandise inventory 1,600

f. Recall Z-Mart’s sale for $2,400 that had a cost of $1,600. Assume the customer returns part
of the merchandise. The returned items sell for $800 and cost $600.
Periodic method Perpetual method
Dr Cr Dr Cr
Sales returns and allowances 800 Sales returns and allowances 800
Account receivables 800 Account receivables 800
Merchandise inventory 600
Cost of goods sold 600
g. Z-Mart received the full amount less 3% discount.
Full Amount = 2400 - 800 = 1,600

Periodic method Perpetual method

Dr Cr Dr Cr
Cash 1,552 Cash 1,552
Sales Discount (1600x3%) 48 Sales Discount (1600x3%) 48
Accounts Receivables 1,600 Accounts Receivables 1,600

18 Adapted By Dr Selim