Merchandising Transactions
Revenue transactions:
The Sales account is used only to record sales of merchandise to customers. Revenue transactions for merchandising firms can be summarized as follows:
| Related Accounting Entries | ||||||
|---|---|---|---|---|---|---|
| Transaction | Debit | Credit | ||||
| Sell merchandise to customer | Cash (or Accounts Receivable) | |||||
| Sales | ||||||
| Allow customers to return merchandise or grant a reduction on original price | Sales Returns and Allowances | Monday, July 30, 2007 1:31 PMtd> | Account Receivable (or Cash) | |||
| Receive payment for merchandise sold on credit | Cash | |||||
| Sales Discounts (if applicable) | ||||||
| Accounts Receivable | ||||||
Purchase transactions:
The Purchases account is debited only for merchandise purchased for resale. Its sole purpose is to accumulate the total cost of merchandise purchased during an accounting period. The transactions involving purchases of merchandise can be summarized as follows:
| Related Accounting Entries | ||||
|---|---|---|---|---|
| Transaction | Debit | Credit | ||
| Purchase merchandise for resale | Purchases | |||
| Cash (or Accounts Payable) | ||||
| Incur transportation charges on merchandise purchased for resale | Freight In | |||
| Cash (or Accounts Payable) | ||||
| Return unsatisfactory merchandise to supplier, or obtain a reduction from original price | Accounts Payable (or Cash) | |||
| Purchases Returns and Allowances | ||||
| Pay for merchandise purchased on credit | Accounts Payable | |||
| Cash | ||||
| Purchases Discounts (if applicable) | ||||