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Merchandising Cycle Workbench Chapter 7 · Accounting for Merchandising Operations
Chapter 7 · Special journals → Reporting

A merchandiser, the whole cycle — live

Record the month in the four special journals and the general journal; everything you type flows automatically into the ledger, the trial balance, the worksheet, and finally the merchandising income statement and balance sheet. Change any figure and watch the chain re-foot.

Scenario

iBagani Hardware Trading — January 2026

Bagani Hardware Trading is a sole proprietorship that buys and sells hardware goods. It uses the periodic inventory method. Below is its opening trial balance and the month's transactions. This business and its figures are illustrative and do not appear in the printed book. Compare its income statement — with a full COGS section — against the service business in the Chapter 5 workbench.

Opening balances · Jan 1, 2026

Cash
₱150,000
Accounts Receivable
₱40,000
Merchandise Inventory
₱80,000
Store Supplies
₱10,000
Store Equipment
₱120,000
Accum. Depreciation
(₱20,000)
Accounts Payable
(₱50,000)
Bagani, Capital
(₱330,000)

Transactions during January

  • Jan 2 — Owner invested an additional ₱50,000 cash.
  • Jan 3 — Bought goods on account, Supplier X, ₱60,000.
  • Jan 5 — Sold goods on account, Customer A, ₱60,000 (2/10, n/30).
  • Jan 8 — Paid Supplier X in full, ₱60,000.
  • Jan 10 — Cash sales, ₱80,000.
  • Jan 12 — Bought goods on account, Supplier Y, ₱45,000.
  • Jan 14 — Sold goods on account, Customer B, ₱50,000.
  • Jan 15 — Customer A paid within the discount period (2% discount).
  • Jan 16 — Returned ₱5,000 defective goods to Supplier Y.
  • Jan 18 — Paid salaries, ₱22,000.
  • Jan 20 — Bought goods on account, Supplier Z, ₱25,000.
  • Jan 22 — Sold goods on account, Customer C, ₱30,000.
  • Jan 24 — Customer B returned ₱3,000 of goods.
  • Jan 25 — Paid store rent, ₱15,000.
  • Jan 28 — Collected ₱40,000 of the beginning receivable.
  • Jan 30 — Owner withdrew ₱10,000 cash.
Month-end data: store supplies on hand ₱4,000; depreciation for the month ₱2,000; unpaid salaries ₱3,000; merchandise inventory by count ₱90,000.
Ch 7 · Books of original entry

1Journalize — special & general journals

Record each transaction in the right journal. Routine sales, purchases, cash receipts and cash payments go to the four special journals; everything else goes to the general journal. Column totals post to the ledger automatically below.

Ch 7 · Posting

2The ledger — T-accounts (auto-posted)

Beginning balances plus every journal entry above, posted live. Read-only — this is what your journals produce.

Ch 7 · Before adjusting

3Unadjusted Trial Balance

Each ledger balance on its normal side. It must foot to equal debits and credits before you adjust.

Ch 7 · Month-end

4Adjusting entries & ending inventory

Enter the three month-end adjustments and the ending inventory count. They feed straight into the worksheet and statements.

Ch 7 · The merchandiser's worksheet

5Ten-column worksheet (auto-built)

Adjusted trial balance extended into the Income Statement and Balance Sheet columns. Note the special handling of inventory under the periodic method: the beginning balance extends to the Income Statement debit column, while the ending count enters as both an Income Statement credit and a Balance Sheet debit.

Ch 7 · Reporting

6Financial statements

The merchandising income statement — with its full Cost of Goods Sold section — and the classified balance sheet, built from everything above.

Income Statement — for the month ended Jan 31, 2026

Balance Sheet — as at Jan 31, 2026