Professional Documents
Culture Documents
Account
Inventory
Receivables 2.Sale of merchandise on account
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Accounting
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PURCHASES OF MERCHANDISE
(INVENTORY)
Purchases of inventory are recorded at cost.
Inventory ****
Account Payable ****
The data contained in this entry are posted to general ledger and also to the inventory
subsidiary ledger.
SALE OF INVENTORY
The revenue earned in the sale transaction is equal to the sale price of the inventory and is
credited to a revenue account entitled sales.
Account receivable ****
Sales ****
The matching principle requires that revenue be matched (offset) with all of the cost and
the expenses incurred in producing that revenue. Therefore, a second journal entry is
required at the date of sale to record the cost of goods sold.
Cost of goods sold ****
Inventory ****
This entry will be based upon the cost of the merchandise.
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Where,
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NOTE Accounting for sale transactions is the same under perpetual and periodic
inventory system, with one notable exception. In a periodic inventory system, no entries
are made transferring costs from the inventory account to the cost of goods sold account.
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3)Items in inventory have a high per unit cost. income tax returns
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CASE STUDY
MISSION
To provide the different kinds literately material to literately
person as per demand of the public.
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General Journal
Date Account Title And Description Debit Credit
10 Jan Inventory 9,800
Account Payable 9,800
Received books (10,000 * 0.98)
10 Jan Transportation-in 60
Cash 60
Paid freight charges on books received
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Inventory 980
Returned books (1,000 * 0.98)
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Merits
• Publish all types of books like novels, study books, poetry books,
magazines etc.
• It has copy rights for any published book or magazine and any
research book.
• Company has complete network for distribution of their books,
magazines.
• Registered under the act of Government of Pakistan.
• Good working capital for operation of the organization.
Demerits
• No proper system for inventory management.
• No computerized system for controlling and maintaining inventory.
• It has good resources but no proper management of resources.
• No proper price list.
• Company is not using promotional tools.
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Accounting
Conclusion
Alhamra Publishing Company maintaining a heavy inventory of
different books. But in the era of information technology, there is
no computerized system. The company is maintaining their
accounts manually which creates lot of problems for customers, as
well as workers. Even then the search of the book or availability of
the book can not be pin pointed. Company is providing quality
literary material to the common person.
Recommendations
• The company must establish their own outlets for selling of
their product.
• Price and quality should be reasonable.
• Inventory management system should be computerized.
• Computerized database system should be design for keeping
record of all types of publication.
• Price list should be managed properly.
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