1. COGS (periodic) & Terms of Sale

2. MERCHANDISING ACCOUNTS
To calculate net income (or net loss) for a merchandising company, subtract COGS and expenses from revenue:
Net Sales
COGS
= Gross Profit
Expenses
= Net Income (or NL)

3. COST OF GOODS SOLD
Since COGS is the largest expense for merchandising companies, it receives its own section on the I/S
Can also have a separate Schedule of Cost of Goods Sold

4. COST OF GOODS SOLD To prepare a Schedule of COGS,
we follow these steps:
Beginning Merchandise Inventory
+ Net Purchases (Purchases - Purch. R & A - Purch. Disc)
= Cost of Merchandise Available for Sale
-  Ending Merchandise Inventory (determined by a physical count)
= Cost of Goods Sold

5. Schedule of Cost of Goods Sold For the month ended June 30, 2016
Deliah’s Desks Shop
Schedule of Cost of Goods Sold
For the month ended June 30, 2016
Merchandise Inventory, June 1 $
Add: Purchases $
Less: Purchase Returns & Allowances
$ 8 000
Purchase Discounts
400
(8 400)
Net Purchase Cost
34 000
Add: Transportation-in
2 000
Total Cost of Merchandise Purchased
36 000
Cost of Merchandise/Goods Available for Sale
54 000
Less: Merchandise Inventory, June 30
20 000
Cost of Goods Sold $
=======

7. NEW ACCOUNTS FOR MERCH. BUS. (p. 277)
SECTION
NO.
TITLE
Assets
120
Merchandise Inventory
Liabilities
206
207
HST Payable
HST Refundable
Owner’s Equity --
Revenue
400
401
402
Sales
Sales Returns & Allowances
Sales Discounts
Cost of Goods Sold
500
501
502
503
550
Purchases
Purchases Returns & Allowances
Purchases Discounts
Transportation-in
Expenses
601
Delivery Expense

8. TERMS of SALE: commonly used terms for credit sales (on account)
COD – cash on delivery (pay only when goods are received)
Receipt of Invoice – payment must be made as soon as invoice is received
Net 30 – full amount due in 30 days
EOM – payment due at end of month
10th following – payment is due on the 10th day of the following month
2/10, n/30 – 2% discount is you pay within 10 days, otherwise full amount due in 30 days
1/10, n/30, EOM – 1% discount if you pay within 10 days, otherwise full amount must be paid within 30 days of the end of the month