Wize University Introduction to Financial Accounting Textbook > Merchandising
Recording Sales - Periodic Inventory
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Recording Sales (Periodic)
Recording sales using the periodic inventory system only requires you to record the sales revenue.
Sale of Merchandise
Only record Sales revenue and proceeds from sale (typically Cash or Accounts receivable)
Watch Out!
DO NOT record Cost of goods sold and Inventory when recording a sale under the periodic system.
Freight Cost
- Cost of shipping merchandise from to customer.
- Who pays for shipping?
- FOB destination: seller is responsible for the goods until they reach the destination.
- Sale is recorded the day the goods reach the destination.
- Sellerpays for the shipping.
- The shipping cost is expensed, account is called Freight-out.
- FOB shipping point: buyer is responsible for the goods as soon as they are shipped.
- Sale is recorded the day the goods are shipped.
- Buyerpays for the shipping.
- The shipping cost is not recorded by the seller.
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Example: Recording Sales (Periodic)
Prepare all necessary journal entries related to the following events
May 14: XYZ Corp. sold 50 units to Customer X at a price of $80 per unit. The inventory was valued at $30 per unit in the company's books. The terms of the sale were 1/15, n/30 and FOB shipping point. The goods were shipped on May 16th at a cost of $40 and were delivered to Customer X on May 19th.
May 20: XYZ Corp. sold 60 units to Customer Y at a price of $90 per unit. The inventory was valued at $30 per unit in the company's books. The terms of the sale were 1/15, n/30 and FOB destination. The goods were shipped on May 22nd at a cost of $80 and were delivered to Customer Y on May 27th.
To record the shipping cost
To record the sale
Practice: Recording Sales (Periodic)
Wize Merchandisers Inc. has just hired you to be their new bookkeeper and your first task is to prepare journal entries for all the following events that took place in April 2020. The company uses the periodic inventory system.
Apr. 1: Sold merchandise to a Twilight Ltd. for $2,000 on account. The cost of the merchandise was $750. The terms of the sale are 1/10, n/30 and FOB destination. The merchandise was shipped the following day at a cost of $60 and was delivered on April 5th.
Apr. 7: Twilight Ltd. returned 25% of the goods purchased on April 1st.
Apr. 8: Sold 90 units of merchandise for $25 per unit to Omega Corp. The merchandise had cost Wize $10 per unit. The terms of the sale are 2/15, n/45, FOB shipping point. The goods were shipped on April 10th at a cost of $140.
Apr. 9: Twilight Ltd. paid their balance in full.
Apr. 14: Omega Corp. paid $2,000 for a purchase made in March.
Apr. 15: Omega Corp. paid $500 towards their balance owing from the purchase made April 8th.
Apr. 21: Twilight Ltd. returned 10% of the goods purchased on April 1st.
Apr 29: Omega Corp. paid their remaining balance.
On which date will the company record the cost of shipping the merchandise sold on April 1st?