▶ Open the Merchandising Cycle Workbench
Run the entire cycle for Bagani Hardware Trading: record a month in the four special journals (sales, purchases, cash receipts, cash disbursements) plus the general journal, then follow your entries through the ledger and worksheet to the merchandising income statement — net sales, cost of goods sold, gross profit — and the classified balance sheet, all built live from your entries.
A · Supplemental Illustration Center
Online-exclusive visual guides
1. Service vs merchandising income statement — what changes?
Service business (single-step)
Revenue
Service Revenue
Less
Operating expenses
=
Net Income
Merchandiser (multi-step — two extra layers)
Net Sales
Sales − Returns & Allowances − Sales Discounts
− COGS
Cost of the goods actually sold
= Gross Profit
The merchandiser's first scoreboard — negative means selling below cost
− OpEx
Including Freight-Out (a selling expense, never part of COGS)
=
Net Income
2. FOB decoder — who owns it, who pays the truck?
| Term | Ownership passes… | Freight is the cost of… | Effect |
|---|---|---|---|
| FOB Shipping Point | When goods leave the SELLER's dock | Buyer | Buyer records Freight-In → part of net purchases / COGS |
| FOB Destination | When goods reach the BUYER's door | Seller | Seller records Freight-Out → operating (selling) expense |
| Freight Prepaid | Seller PAID the carrier (cash flow, not ownership) | If buyer should bear it: seller bills it back via A/R | |
| Freight Collect | Buyer PAID the carrier at arrival | If seller should bear it: buyer deducts it from A/P | |
Two separate questions: the FOB term answers who bears the freight; prepaid/collect answers who advanced the money. Mismatches create the reimbursement entries.
3. The VAT see-saw — output vs input
When you SELL
Invoice = price + 12% VAT. The VAT is Output VAT — a liability you collected for the BIR, never your revenue.
When you BUY
Supplier's invoice includes 12% VAT — your Input VAT, an asset (a credit against what you owe).
Period-end
Output − Input = VAT Payable (remit to BIR). If Input > Output → Excess Input VAT carries over.
Extracting the base
From a VAT-inclusive amount: Base = Amount ÷ 1.12 ; VAT = Amount × 12⁄112.
B · Interactive Workspaces
Practice tools
Tool 1 · COGS calculator (periodic system)
Feed the components — get the full COGS schedule.
Tool 2 · Invoice settlement calculator — trade discount, cash discount & VAT
List price → trade discount → 12% VAT → credit terms. How much settles the invoice?
C · Online-Exclusive Assessment