JPIA Review
Fundamentals of
Accounting 1 & 2
Discussion Points
Payroll Accounting
Accounting for Merchandising
Transactions
Subsidiary Ledgers and
Special Journals
PART 1:
PAYROLL ACCOUNTING
Definition of Terms
Gross Pay: the total amount of payroll the employee might be entitled to
based on hours worked
Allowances: additional payments to certain employees to help cover
transportation, living, travel, or other costs (de minimis benefits)
Deductions: subtractions from the employees’ gross pay
Taxable income= Gross Pay - Contributions
Net Pay = Gross Pay + Allowances - Deductions
Deductions
Contributions: the amount paid to the government agencies by and on
behalf of the member.
SSS
PHIC
HDMF
Withholding Tax: takes a set amount of money out of an employee's
paycheck and pays it to the government.
PART 2:
MERCHANDISING TRANSACTIONS
Sales and Related Accounts
Purchase and Related Accounts
Accounting for Inventories
Merchandising Concern: Income Statement
Revenue from Sales xx
Cost of Goods Sold xx
Gross Margin xx
Operating Expenses xx
Net income xx
Sales and Related Accounts
Gross sales: total sales for cash and total sales on credit
Trade discount: percentage reduction from a published list
price.
Sales returns and allowances: merchandise return if defective,
poor quality, etc. The seller will issue a credit memo.
Sales discount: also known as cash discounts. to encourage
customers to pay promptly.
Ex. 2/10, n/30
Purchase and Related Accounts
Purchases: used only for merchandise purchased for sale.
Purchase returns and allowances: used in recording
returns of merchandise to the seller instead of directly
crediting the Purchase account.
Purchase discount: credited by the buyer when he avails of
the cash discounts.
Transaction Costs on Merchandise
Purchased or Sold
1. FOB Shipping Point - buyer agreed to shoulder all
transportation costs. The buyer receives the title to the goods
at shipping point.
2. FOB Destination - seller agreed to shoulder all transportation
costs. The buyer receives the title to the goods at point of
destination.
3. Freight prepaid - seller pays the transportation costs.
4. Freight collect - buyer pays the transportation costs.
Transaction Costs on Merchandise
Purchased or Sold
1. FREIGHT IN - account used to record freight costs incurred by
the buyer in acquiring the merchandise.
2. FREIGHT OUT - account used to record shipping costs
shouldered by the seller for sales of merchandise to customers.
3. COST OF GOODS SOLD - cost of merchandise sold to
customers during an accounting period.
Accounting for Inventories
PERPETUAL INVENTORY SYSTEM PERIODIC INVENTORY SYSTEM
- provides detailed records of the - count of physical inventory
quantity and cost of each item of takes place periodically.
inventory and continuously shows
the cost of goods on hand. - used by merchandising
companies with low value items of
- high-unit value items such as the inventory.
automobiles, computers, and
stereo.
- may be maintained manually.
PERIODIC PERPETUAL
Purchase of merchandise on account
Purchase xx Merchandise inventory xx
Accounts payable xx Accounts payable xx
Payment of freight on
Freight in xx Merchandise inventories xx
Cash xx Cash xx
Return of merchandise purchased
Accounts payable xx Accounts payable xx
Purchase return xx Merchandise inventory xx
Sale of merchandise on account
Accounts receivable xx Accounts receivable xx
Sales xx Sales xx
COGS xx
Merchandise inventory xx
Return of merchandise sold
Sales return xx Sales return xx
Accounts receivable xx Accounts receivable xx
Merchandise inventory xx
COGS xx
Adjusting of ending inventory
Merchandise inventory xx No entry
Income summary xx
GROSS METHOD NET METHOD
Purchase on account
Purchase xx Purchase(net) xx
Accounts payable xx Accounts payable xx
Payment within discount period
Accounts payable xx Accounts payable xx
Purchase discount xx Cash xx
Cash xx
Payment beyond discount period
Accounts payable xx Accounts payable xx
Cash xx Purchase discount lost xx
Cash xx
No payment, discount expired
No entry Purchase discount lost xx
Accounts payable xx
PART 3:
SUBSIDIARY LEDGER &
SPECIAL JOURNALS
Sales journal
Cash receipts journal
Purchases journal
Cash disbursement journal
Subsidiary ledger
SPECIAL JOURNALS
SALES JOURNAL
- used to record all sales of merchandise on account
CASH RECEIPTS JOURNAL
- used to record all inflows or receipts of cash
PURCHASE JOURNAL
- used to record all purchases of merchandise and other items on
account
CASH DISBURSEMENT JOURNAL
- used to record all payments or outflow of cash.
CONTROL ACCOUNTS AND
SUBSIDIARY LEDGER
CONTROL ACCOUNT
- account in the general ledger that shows all the total balance of the
subsidiary accounts related to it.
SUBSIDIARY LEDGER ACCOUNT
- shows the details supporting the related general ledger control
account balance.
