
Concept explainers
Concept Introduction:
Inventory: These are goods which are owned by company and expected to sell in its normal course of business
Merchandise: The goods are referred as merchandise which the company purchases and resells the same goods to customers
Merchandiser: The Company who business is to buy the merchandise at purchases cost and sell the same merchandise at higher price which is sales price and earns profit. Merchandiser can be categorized as wholesaler and retailer
Perpetual Inventory System: Each merchandise purchase and sales cost are recorded and updated continuously for all merchandise. In perpetual Inventory system if merchandise is sold. The company determines the cost of goods sold and passes an accounting entry. It will debit “Cost of goods sold” and credit “Merchandise Inventory” . If merchandise is purchased it will pass the accounting entry by debiting “Merchandise Inventory” and crediting “Account payable” if purchases on credit or “Cash or Bank “if paid Cash or Cheque for the purchases
Sales under perpetual Inventory System: when merchandiser sells the goods it can be through cash sale or credit Sale. There will be two entries for each sales transaction as explained below
- When sale of merchandise is made as per revenue recognition principle. The revenue will be recognized by debiting “
Accounts receivable ” if there is credit sales or “Cash” if it cash sales and by crediting “Sales” - The amount of cost of inventory which is sold the accounting entry will debiting “ cost of goods sold” and crediting “Merchandise Inventory”
Purchases under perpetual Inventory System: when merchandiser sells the goods it can be through cash sale or credit Sale. There will be one entry for each purchase transaction as explained below
- When purchase of merchandise is made. the accounting entry will be by debiting “Merchandise Inventory” by crediting “Accounts payable” if there is credit purchase if cash is paid than “Cash” will be credited
Cash Payment under Perpetual Inventory system: If cash payment is made within the discount period by the buyer. The accounting entry is Debiting “Accounts payable” and crediting “Merchandise Inventory” with the purchase discount amount and actual cash paid is credited to “Cash”
Cash collection under Perpetual Inventory system: If cash collection is made within the discount period given to the buyer. The seller will make a accounting entry by Debiting “Cash” for actual cash received and “Sales discount” with the discount amount given and sales invoice value will be credited to “Accounts receivable”
1. To Prepare: Journal entries for Chilton Systems

Want to see the full answer?
Check out a sample textbook solution
Chapter 5 Solutions
FUND.ACCT.PRIN -ONLINE ONLY >I<
- Question 2.5.7: Job costing Tarikha Company has the following data: direct labor $232,000, direct materials used $182,000, total manufacturing overhead $240,000, and beginning work in process $32,000. Compute total manufacturing costs.arrow_forwardAssess the role of modern accounting theories in guiding research in accounting. Discuss how contemporary theories, such as stakeholder theory, legitimacy theory, and behavioral accounting theory, shape research questions, hypotheses formulation, and empirical analysisarrow_forwardchoose best answerarrow_forward
- Do fast answer of this accounting questionsarrow_forwardFinancial Accountingarrow_forwardTechGadget Inc. sells a high-end tablet with a unit price of $120. The unit variable cost is $50, and fixed costs amount to $240,000. Current sales volume is 15,000 units. By how much will operating income change if sales increase by 6,000 units? A) $420,000 increase B) $350,000 increase C) $250,000 increase D) $500,000 increasearrow_forward
- Kenichi Industries had $420 million in sales last year and $310 million in fixed assets that were used at 70% of capacity. In millions, by how much could Kenichi's sales increase before it is required to increase its fixed assets?arrow_forwardWhat are the total overhead costs assigned to job 101?arrow_forwardGeneral accounting questionarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





