212
Correct
Incorrect
Sales
$160,000
$160,000
Cost of Goods Sold
Beginning Inventory
50,000
50,000
Net Purchases
65,000
65,000
Cost of Goods Available for Sale
115,000
115,000
Less: Ending Inventory
45,000
35,000
Cost of Goods Sold
70,000
80,000
Gross Profit
90,000
80,000
Operating Expense
50,000
50,000
Net Income
$40,000
$30,000
____________
figure 7A.15
Similar problems would occur if a company sells inventory with terms of FOB destination.
Although the items are not in the seller’s warehouse, the seller still owns the items while they are
in transit and must include them as part of its inventory.
To summarize the differences between the perpetual and periodic journal entries, the following
table in Figure 7A.16 indicates which accounts are affected by the types of transactions we have
learned.
Transaction
Perpetual*
Periodic*
Debit
Credit
Debit
Credit
Purchase
Inventory (B/S)
Cash or Accounts
Payable
Purchases (I/S)
Cash or Accounts
Payable
Purchase Return Cash or Accounts
Payable
Inventory (B/S)
Cash or Accounts
Payable
Purchase Returns &
Allowances (I/S)
Purchase Allowance Cash or Accounts
Payable
Inventory (B/S)
Cash or Accounts
Payable
Purchase Returns &
Allowances (I/S)
Payment with
Discount
Accounts Payable Cash
Inventory (B/S)
Accounts Payable Cash
Purchase Discounts
(I/S)
Freight
Inventory (B/S)
Cash or Accounts
Payable
Freight-In (I/S)
Cash or Accounts
Payable
Sales
Cash or Accounts
Receivable
Cost of Goods Sold
(I/S)
Sales Revenue (I/S)
Inventory (B/S)
Cash or Accounts
Receivable
Sales Revenue (I/S)
Inventory: Merchandising Transactions
Chapter 7
Appendix
