On April 7, CBS purchases 30 desktop computers on credit at a cost of $400 each. Under a periodic system, Purchases is used instead of Merchandise Inventory. Purchases-Packages increases (debit) by $6,200 ($620 × 10), and Cash decreases (credit) by the same amount because the company paid with cash. CBS has enough cash-on-hand to pay immediately with cash. On April 1, CBS purchases 10 electronic hardware packages at a cost of $620 each. Cash and Credit Purchase Transaction Journal Entries The per-item purchase prices from the manufacturer are shown. Each electronics hardware package contains a desktop computer, tablet computer, landline telephone, and a 4-in-1 desktop printer with a printer, copier, scanner, and fax machine.ĬBS purchases each electronic product from a manufacturer. CBS is a retailer providing electronic hardware packages to meet small business needs. To better illustrate merchandising activities under the periodic system, let’s return to the example of California Business Solutions (CBS). Basic Analysis of Purchase Transaction Journal Entries The following example transactions and subsequent journal entries for merchandise purchases are recognized using a periodic inventory system. We will not explore the entries for adjustment or closing procedures but will look at some of the common situations that occur with merchandising companies and how these transactions are reported using the periodic inventory system. This requires different account usage, transaction recognition, adjustments, and closing procedures. Some organizations choose to report merchandising transactions using a periodic inventory system rather than a perpetual inventory system.
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