I am really confused on how the terms of transportation and merchandise should be journaled. Also, the discounts and stuff.

Purchased $5,000 of merchandise from Phillips Co. on account, terms 2/10, n/30

Paid Phillips Co. on account for purchases, less discount.

Purchased $3,500 of merchandise from Farris Co. on account, terms FOB shipping point, n/30,
With prepaid shipping costs of $80 added to the invoice.

Returned merchandise from Farris Co. $900

Paid Farris Co. on account for purchases, less return.

I am really confused on how the terms of transportation and merchandise should be journaled. Also, the discounts and stuff.

Purchased $5,000 of merchandise from Phillips Co. on account, terms 2/10, n/30

Dr. Merchandise 5,000
Cr. Accounts Payable – Phillips Co. 5,000


Paid Phillips Co. on account for purchases, less discount.

Dr. Accounts Payable – Phillips Co. 5,000
Cr. Cash 4,900 (5,000*.98)
Cr. Purchases Discounts Received 100 (5,000*.02)


Purchased $3,500 of merchandise from Farris Co. on account, terms FOB shipping point, n/30, with prepaid shipping costs of $80 added to the invoice.

Dr. Merchandise 3,420
Dr. Freight-in 80
Cr. Accounts Payable – Farris Co. 3,500


Returned merchandise from Farris Co. $900

Dr. Accounts Payable – Farris Co. 900
Cr. Merchandise 900


Paid Farris Co. on account for purchases, less return.

Total AP owed to Farris: 3,500-900 = 2,600

Dr. Accounts Payable – Farris Co. 2,600
Cr. Cash 2,600