Polytechnic University of the Philippines Quezon City, Philippines COLLEGE OF EDUCATION

DEMONSTRATION LESSON PLAN

Prepared by: Estavillo, Shanin A.

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GRADE/ LEVEL: Fourth year High School SUBJECT/ LEARNING AREA: Bookkeeping LESSON/S: Chapter 6: Accounting for a Merchandising Business Lack of Control under Periodic Inventory System The worksheet for a Merchandising Company

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TEACHING METHODOLOGY: Teaching by asking and Lecture Method

V. OBJECTIVES: At the end of the lesson, the students will be able to: 1. Explain the difference between a periodic and perpetual inventory system. 2. Better understand how the accounting records are updated with a periodic inventory system. 3. Prepare a worksheet for a merchandising company 4. Participate actively in the classroom activities. VI. PROCEDURES: A. PREPARATION 1. Routine Activities o Prayer o Greetings o Checking of Attendance B. PRESENTATION Lack of control under Periodic Inventory System The periodic inventory method is used for its simplicity and relatively low cost, but it provides little control over inventory. Any items not included in the

physical count of inventory at the end of the period are assumed to have been sold. Thus, even if items have been stolen, they are assumed to have been sold and their costs are included in the cost of goods sold. To illustrate, assume the cost of goods available for sale was P150,000, and ending inventory is P45,000. These figures suggest that the cst of goods sold was P105,000. Assume that P3,000 of goods were actually shoplifted, the ending inventory would have been P48,000, and the cost of goods sold only P102,000. Thus, the P105,000 cost of goods sold calculated under the periodic inventory procedure includes both the costs of merchandise delivered to customers and the cost of merchandise stolen.

The work sheet for a Merchandising Company The work sheet for a Merchandising Company is the same as for a service company except for the merchandise related accounts. Recall that the use of worksheet assists in the preparation of the adjusting and closing entries. The work sheet also contains all of the information needed for the preparation of the financial statement. Note that the amount of the ending inventory must replace the inventory at the beginning of the period. This is accomplished by two adjusting entries:

Income summary Merchandising Inventory

47,100 47,100

To close the beginning inventory Merchandising Inventory Income Summary 39,600 39,600

To record the ending inventory

The first entry removes the debit balance from the inventory account and transfers the beginning inventory to Income Summary. The second entry reinstates the inventory balance for the ending amount. It is credited to Income summary because as shown in the computation of the cost of merchandise sold, the ending inventory is a deduction from the merchandise available for sale.

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REFERENCE (T): Hernane, Milagros B. Principles of Financial Accounting, 2010 pp.193-194

VIII. LEARNERS MATERIAL USED: Notebook and Pen IX. ASSESSMENT: Recitation X. REMARKS: Number of Learners with mastery level Number of Learners needing remediation ___ ___