Category Archives: Accounting for a Merchandising Business

Accounting for a Merchandising Business

  • Purchases
  • Sales
  • Freight In

Questions You Should be Able to Answer:

What are the journal entries to record the purchase and sale of merchandise?

What is the formula to determine the Cost of Goods Sold in a periodic inventory system?

What is the Freight In account?

How is the merchandise inventory shown on both the income statement and balance sheet?

Additional Practice and Review:

Page 402 Exercise 2, 3 and 4

page 406 Exercise 1 and 3



Accounting for a Merchandising Business – Inventory


  • What is a merchandising business?
  • How is it different from a service business?


  • Wholesaler vs. Retailer
    What is inventory?
  • Why is it so critical?

Discussion: Two Aspects – BS (Current Asset) and IS (COGS)
Periodic vs. Perpetual inventory systems – The Inventory Cycle
What is COGS? – calculation and using the equation

Additional Review and Practice:

  1. Read 396-401, 404-406
  2. Complete Exercise 2-5 Page 402
  3. Questions 1-17 Page 401