BKP Merchandising

there are two (2) major activities that are involved in a merchandising business

• buying

• selling

• trading

• rendering services

There are two methods which can be used to account for the transactions and events affecting the merchandise of a merchandising firm

• management information system

• inventory system

• Periodic inventory system

• Perpetual inventory system

is determined by a physical count of the merchandise on hand at the end of an accounting period.

• Periodic inventory system

• perpetual inventory system

a continual, or perpetual record of the inventory activity is maintained.

• perpetual inventory system

• periodic inventory system

account use to summarize acquisitions of merchandise for resale

• freight in

• purchases

• sales

account used to summarize reductions from acquisition prices of merchandise bought on account, granted by the seller of merchandise due to early cash payment of the buyer

• purchase discounts

• sales discounts

• purchase returns and allowances

account used to summarize sale of stocks in trade of merchandising firms

• Sales

• service income

• Professional fees

account used to summarize reduction from selling prices of merchandise sold to customers on account due to early cash settlement of the account

• sales discounts

• sales returns and allowances

account used to transportation costs for delivering merchandise sold to consumers. This is a debit account

• freight in

• freight out

For the buying activities, however, only one account is generally used

• Merchandise Inventory

• Purchases