Chapter 5, Problem 1PSA

To determine

Concept Introduction:

Journal entries:

It is the first and the foremost step in maintaining the books of accounts. Journal entries record the economic transactions made for the business in a chronological order.

Perpetual system:

This method records inventory and cost of goods sold continuously whenever a sale or a purchase transaction takes place.

Gross method:

Under this method of accounting, sales are recorded at gross invoice value and if cash discount is availed by the customer, then accounts receivable are adjusted by passing an entry.

To Prepare:

The journal entries for merchandising activities considering that the company is following perpetual inventory system and gross method.