Accounting: Merchandising Journal Entries
Buying and selling inventory is the foundation of wholesale and retail business. These are the most common journal entries related to the purchase and sale of merchandise in a perpetual inventory system:
- Purchase of merchandise inventory with cash: debit to Merchandise Inventory, credit to Cash
- Return of merchandise to a vendor in exchange for cash: debit to Cash. credit to Merchandise Inventory
- Cash payment for freight in: debit to Merchandise Inventory, credit to Cash
- Purchase of merchandise inventory with cash within the discount period: debit to Accounts Payable, credits to Cash and Merchandise Inventory
- Paying for merchandise inventory with cash after the end of the discount period: debit to Accounts Payable, credit to Cash
- Sale of merchandise inventory for cash at the net amount: debits to Cash and Cost of Goods Sold, credits to Sales Revenue and Merchandise Inventory
- Estimation of the amount of returned inventory: debits to Sales Revenue and Refunds Payable, credits to Estimated Returns Inventory and Cost of Goods Sold
- Return of some inventory that was purchased on account: debits to Refunds Payable and Merchandise Inventory, credits to Accounts Receivable and Estimated Returns Inventory
- Granting of a cash sales allowance to a customer: debit to Refunds Payable, credit to Cash
- Payment for freight out: debit to Delivery Expense, credit to Cash
- Payment on account by a customer within the discount period: debit to Cash, credit to Accounts Receivable
- Payment on account by a customer after the end of the discount period: debit to Cash, credits to Accounts Receivable and Sales Discounts Forfeited
- Adjustment of the inventory count because of loss, theft, or damage: debit to Cost of Goods Sold, credit to Merchandise Inventory