Periodic Inventory method:

1.Your firm made a payment to a supplier on account. The amount paid was $535, and we took the following terms: 3/10, n30.

Accounts Payable DR 535
Cash CR 518.45
Purchase Returns CR 15.45

2.Defective Merchandise that we bought several weeks ago was returned for a cash refund. It was $700 (+GST)

Cash DR 742
GST Recoverable CR 42
Purchase Return CR 700

Also, I want to ask 2 questions. How can you only look at the account of Sale Discounts on the closing entries to say that a company made a profit or loss?

For the periodic system (NOT the end of the year),why does Merchandise Inventory (an asset) appear in the Income Statement section of the worksheet? Please explain this to me. Thank you~