8. Cheatsheet Periodic System

What accounts that are used in the Periodic System have debit balances (that are new so not Sales Discounts and Sales Returns and Allowances even though it is also used in the periodic system)?

Purchases, Transportation-In, Inventory Returns Estimated

What accounts that are used in the Periodic System have credit balances?

Purchases Discounts, Purchases Returns and Allowances, Sales Refund Payable, Allowance for Sales Discounts

What type of account is Inventory Returns Estimated?

Current asset reflecting the inventory estimated to be returned in the next period

What type of account is Sales Refund Payable?

Current liability reflecting the amount expected to be refunded to customers in the next period

What is the entry for when you as the buyer makes a credit purchase?

debit Purchases, credit Accounts payable

What is the entry for when you as the buyer pays off purchase amount within the discount period?

debit Accounts Payable for full amount, credit Purchases Discounts for discount amount, credit Cash for full amount minus discount

What is the entry for when you the buyer pays off purchase amount after the discount period?

debit Accounts payable, credit Cash

What is the entry for when you the buyer are granted a purchase allowance?

debit Accounts Payable, credit Purchases Returns and Allowances

What is the entry for when you the buyer returns merchandise within the discount period?

debit Accounts Payable, credit Purchases Returns and Allowances

What is the entry if you the buyer has to pay a freight charge (FOB shipping point)? (periodic system)

debit Transportation-In, credit Cash

What is the entry for when you make a sale as a merchandiser?

debit Accounts Receivable, credit Sales

Is there a cost side entry for sales in the periodic system?

No.

What is the entry for you as the seller when the buyer pays within discount period?

debit Cash, debit Sales Discounts, credit Accounts Receivable

What is the entry for you as the seller when you receive a return?

debit Sales Returns and Allowances, credit Cash

Is there a cost side for returns using the periodic system?

No.

What is the entry for you as the seller when you grant an allowance to the buyer?

Debit Sales Returns and Allowances, credit Accounts Receivable

Is there an adjust entry for shrinkage in the periodic system?

No.

How is shrinkage measured in a periodic system?

cost of goods sold = cost of goods for sale - cost of ending inventory. Cost of goods sold includes shrinkage

How would you make an adjusting entry for expected sales discounts that would occur in the next period?

debit Sales Discounts, credit Allowance for Sales Discounts (happens at end of period only)

Does Allowance for Sales Discounts have a normal debit or credit balance?

Normal credit balance.

What type of account is Allowance for Sales Discounts

Contra-asset account. Reduces the balance of an asset account, specifically "Accounts Receivable".

What does the adjusting entry for sales discounts do?

This is the period-end adjusting entry under the gross method that estimates the sales discounts arising from current-period sales that are likely to be taken in future periods.

How would you make an adjusting entry for expected returns and allowances, sales side?

debit Sales Returns and Allowances and credit Sales Refund Payable

What type of account is Sales Refund Payable?

A current liability reflecting the amount expected to be refunded to customers.

Is the Sales side of expected returns and allowances the same for Periodic and Perpetual?

Yes.

How would you make an adjusting entry for expected returns and allowances, cost side for periodic?

debit Inventory Returns Estimated, credit Purchases

What type of account is Inventory Returns Estimated?

A current asset reflecting the inventory estimated to be returned.

What is the first closing entry when using the periodic system?

Debit Sales, Merchandise Inventory (ending), Purchases Discounts, Purchases Returns and Allowances. Credit Income Summary

What is the second closing entry when using the periodic system?

Debit Income Summary. Credit Sales Discounts, Sales Returns and Allowances, Merchandise Inventory (beginning), Purchases, Transportation-In and all expenses

What are step 3 and 4 for closing entry?

The same closing entries as before. debit Income Summary, credit Capital and then debit Capital and credit Withdrawals.

To review, what is the formula for cost of goods sold?

• cost of goods sold = cost of goods available for sale - ending inventory

• cost of goods sold = beginning inventory + net purchases (which equals cost of good available for sale) - ending inventory