4. Periodic Purchasing Inventory and Sale of Inventory

Purchase merchandise using cash (periodic)

Debit Purchases for amount bought, Credit Cash for same amount.

• If bought on account, credit Accounts Payable instead of Cash.

Buyer pays off merchandise bought on account (periodic)

Debit Accounts Payable, Credit Cash

• This is the same as perpetual.

Buyer pays within discount period. Journal entry for buyer. (periodic)

Debit Accounts payable for full amount, Credit Purchase Discounts for amount of discount, Credit Cash for amount after discount.

Buyer returns damaged merchandise, buyer's perspective (periodic)

Debit Accounts payable for amount returned, Credit Purchase Returns and Allowances for same amount.

Seller sells inventory and buyer pays in cash (periodic)

Debit Cash, Credit Sales.

There is no second journal entry for cost of goods sold.

Seller receives payment from buyer within discount period (periodic)

Debit Sales discounts for amount of discount, Debit Cash for amount after discount, Credit Accounts receivable for original amount.

This is the same as the perpetual system.

Seller receives return from buyer (periodic)

• Debit Sales returns and Allowances for return amount, Credit Accounts Receivable.
  
  - There is no second entry for cost of goods sold under the periodic system.
  
  - Same entry would be made if seller grants a sales allowance for damaged goods even if there is no return from the buyer.

Buyer buys merchandise, FOB shipping point (periodic)

1. Debit Purchases, Credit Accounts Payable

2. Debit Transportation-in (aka Freight-in) for transportation cost, Credit Cash for same amount.

Buyer's entry if the seller prepays for transportation cost as a convenience to the buyer (FOB shipping point, periodic)

Debit Purchases, Credit Transportation-in for transportation cost, Credit Accounts payable for transportation cost + purchases.

Seller's entry if the seller prepays for transportation cost as a convenience to the buyer (FOB shipping point, periodic)

Debit Accounts receivable for transportation cost, Credit Cash for same amount.

Seller's entry if they sell goods to a buyer (periodic, FOB destination)

1. Debit Accounts Receivable, Credit Sales for amount of merchandise.

2. Debit Transportation Out for transportation cost, Credit Cash for same amount.

No entry for cost of goods sold.