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Source documents and journalizing process in a merchandising business
1. SOURCE DOCUMENTS IN A
MERCHANDISING BUSINESS
• Also known as Business Documents,
• Provides evidence that a business transaction had
occurred.
• It tracks the history of business’s accounting records.
2. COMMONLY USED DOCUMENTS:
a. Purchase invoice
b. sales and purchase orders
c. delivery receipts
d. debit and credit memoranda
e. vouchers
f. Official receipts
1. Purchase invoice: or bill. Issued by the seller to the buyer to indicate that merchandise has
been delivered. Basis of recording sales revenue on the seller’s book (sales invoice)
and purchases on the buyer’s book (purchase invoice)
3. SALES INVOICE INFORMATION:
(taken from Annex C of BIR Revenue
Memorandum)
A. Name and contact details of the seller.
B. Tax details of the seller
C. Word “Invoice”
D. Invoice number
E. Name and contact details of the buyer
F. Date of the invoice
G. Credit terms
H. Number of units delivered
I. Unit of measure for goods delivered
J. Description of goods
K. Unit selling price of goods
L. Total amount of goods
M.Authorized signature.
4. SALES ORDER PREPARE SALES INVOICE
PURCHASE ORDER SALES ORDERPREPARE
2. Sales order is prepared when the buyer informs the seller that he wants to buy from
the seller through a purchase order
• If the buyer does not prepare a purchase order. The sales order only includes the ff:
a. name and contact details of the buyer
b. description of goods
c. number of units ordered.
5. 3. DELIVERY RECEIPT: document issued by
the seller to confirm if merchandise has
been delivered to the billing address.
CONTENT:
a. Name of contact details of the seller
b. Tax details of the seller
c. Word “Delivery Receipt”
d. Receipt number
e. Name and contact details of the buyer
f. Date of the receipt
g. Credit terms
h. Number of units delivered
i. Unit of measure for goods delivered
j. Description of goods
k. Authorized buyer signature
6. 6. DEBIT AND CREDIT MEMORANDUM:
CREDIT MEMO: A transaction that reduces Amounts Receivable from a customer
eg. The customer could return damaged goods.
Credit memo request is a used in complaints If the price calculated for the customer is too
high
DEBIT MEMO: is a transaction that reduces Amounts Payable to a vendor because; you send
damaged goods back to your vendor.
Debit memo request is used in complaints If the prices calculated for the customer were too
low.
7.
8. 7. PAYMENT VOUCHER:
• attached to supporting documents that requires
payment (invoice, company's purchase order and
other information needed to process the seller’s
invoice for payment.)
• an internal document used in a
company's accounts payable in order to collect
the necessary documentation and approval
before paying a seller’s invoice.
CASH VOUCHER: approval of payment in cash
CHECK VOUCHER: approval of payment in check
9. 8. OFFICIAL RECEIPT: it acknowledge the
receipt of cash or check. Used by the
collecting party as evidence of payments.
Required by the BIR. Failure to issue this
may lead to understatement of revenues
which is the basis of tax evasion.
INFORMATION INCLUDED:
a. Name and contact details of the seller
b. Tax details of the seller
c. Word “Official Receipt”
d. Receipt number
e. Name and contact details of the buyer
f. Date of receipt
g. Amount in number and words
h. Sales invoice number or reference
number
i. Authorized signature
10. • Merchandising transactions are recorded both in general and special journal.
• A normal debit balance is increased by a debit and decrease by a credit
• A normal credit balance is increased by a credit and decrease by a debit.
NORMAL DEBIT BALANCE
Assets
Contra Liability
Owner, Drawing
Contra Revenue
Costs and expenses
NORMAL CREDIT BALANCE
Contra Asset
Liabilities
Owner, Capital
Revenues
Contra Cost
STEP 2: JOURNALIZING
11. TYPES OF
ACCOUNTS
EXAMPLES
ASSETS Cash, Accounts Receivable, Merchandise Inventory, Prepaid Insurance, Office
Supplies, Store Furniture and Fixtures, Store Equipment, Office Equipment, Delivery
Equipment, Transportation Equipment
CONTRA
ASSETS
Allowance for Doubtful Accounts, Accumulated Depreciation – Store Furniture
and Fixture, Store Equipment
LIABILITIES Accounts Payable, Unearned Sales Revenue
REVENUES Sales Revenue
CONTRA
REVENUES
Sales Returns and Allowances, Sales Discounts
COST AND
EXPENSES
Purchases, Freight-in, Freight-out, Sales Salaries, Office Supplies Expense,
Store Supplies Expense
CONTRA
COST
Purchase Returns and Allowances, Purchase Discounts
12. 1. a. Purchase of merchandise on cash.
Purchases xx
cash xx
b. Purchase of Merchandise on account
Purchases xx
Accounts Payable xx
c. Purchase of merchandise with down payment
Purchases xx
Cash xx
Accounts Payable xx
2. a. Purchase returns and allowances (cash basis)
Cash xx
Purchase Returns and Allowances xx
b. Purchase returns and allowances (on account)
Accounts Payable xx
Purchase Returns and Allowances xx
c. Purchase returns and allowances (with down payment)
Accounts Payable xx
Purchase Returns and Allowancesxx
13. 3. Partial payment of account with the supplier
Accounts Payable xx
Cash xx
4. a. Full payment of account beyond discount period
Accounts Payable xx
Cash xx
b. Full payment of account within discount period
Accounts Payable xx
Cash xx
Purchase Discount xx
5. a. Sale of merchandise on cash basis
Cash xx
Sales xx
b. Sale of merchandise on account
Accounts Receivable xx
Sales xx
14. 5. c. Sales of merchandise with down payment
Cash xx
Accounts Receivable xx
Sales xx
6. a. Sales returns and allowances (cash basis)
Sales Returns and Allowances xx
cash xx
b. Sales returns and allowance (on account)
Sales Returns and Allowances xx
Accounts Receivable xx
c. Sales returns and allowances (with down payment)
Sales Returns and Allowances xx
Cash xx
7. Partial collection of customer account
Cash xx
Accounts Receivable xx
15. 8. a. Full collection of account beyond discount period
Cash xx
Accounts Receivable xx
b. Full collection of account within discount period
Cash xx
Sales Discount xx
Accounts Receivable xx
9. a. Payment of freight on merchandise purchase
Freight – out xx
Cash xx
b. Payment of freight on merchandise sold
Freight – in xx
Cash xx
10. a. (1) Purchase of supplies on cash basis
Supplies xx
Cash xx
16. 10. a. (2) Returns on supplies purchase
Cash xx
Supplies xx
10. b. (1) Purchase of supplies on account
Supplies xx
Accounts Payable xx
b. (2) Returns of supplies purchase
Accounts Payable xx
Supplies xx
11. a. (1) Purchase of equipment on cash basis
Equipment xx
Cash xx
a. (2) Allowance granted on equipment purchase
Cash xx
Equipment xx
17. 11. b. (1) Purchase on equipment with down payment
Equipment xx
Cash xx
Accounts Payable xx
b. (2) Allowance granted on equipment purchase
Accounts Payable xx
Equipment xx
12. Incurrence of expenses
________Expense xx
________Payable xx
13. (1) Payment of expense
________Expense xx
Cash xx
(2) Payment of expense (already recorded in #12)
________Payable xx
Cash xx
18. 14. a. (1) Initial investment of merchandise by the owner
Merchandise Inventory xx
Owner, Capital xx
a. (2) Initial investment of merchandise with liability
Merchandise Inventory xx
Accounts Payable xx
Owner, Capital xx
14. b. Additional investment of merchandise by the owner
Purchases xx
Owner, Capital xx
15. Withdrawal of merchandise by owner
Owner, Drawing xx
Purchases xx
19. JOURNALIZING IN GENERAL AND SPECIAL JOURNAL
Four Common Types of Journal
1. Sales Journal (SJ): use to record sales of merchandise on account.
2. Purchase Journal (PJ): use to record purchase of merchandise on account.
3. Cash Receipt Journal (CRJ): use to record receipt of cash from whatever source.
4. Cash Disbursement Journal (CDJ): use to record payment of cash for whatever purpose.
5. General J0urnal (GJ): use to record transactions which cannot be recorded on any of the
specialized journal.
NOTE: CV (chech voucher), SI (Sales Invoice), OR (Official receipt)
20. DATE (PURCHASED RELATED) TRANSACTIONS
JUNE 11 Purchase from A merchandise on cash basis, P10,000 [CV#005]
11 Paid freight on merchandise purchased from A, P800 [CV#006]
12 Purchased from B merchandise worth P15,000 on terms 2/10, n/30
13 Purchased from C merchandise worth P20,000 on terms, 50% down, balance 2/10,
n/30 [CV#008]
14 Returned P500 worth of merchandise purchased from A [OR#004]
15 Returned P1,000 worth of merchandise purchased from B
16 Returned P1,500 worth of merchandise purchased form C
17 Paid P2,000 in partial payment of account with C [CV#010]
22 Paid in full account with B [CV#012]
30 Paid in full account with C [CV3013]
21. DATE (SALES – RELATED) TRANSACTIONS
JUNE 15 Sold to D merchandise on cash basis, P10,000 [OR#005]
Paid freight on merchandise sold to D, P800 [CV#009]
16 Sold to E merchandise worth P15,000 on terms 2/10, n/30 [SI#001]
17 Sold to F merchandise worth P20,000 on terms 50% down, balance 2/10, n/30
[OR#006]
18 Received the return of P500 worth of merchandise sold to D [CV#011]
19 Received the return of P1,000 worth of merchandise sold to E
20 Received the return of P1,500 worth of merchandise sold to F
21 Collected P2,000 from F for partial payment of account [OR#007]
26 Collect in full the account with E [OR#008]
30 Collect in full the account with F [OR#009]