Payable 500 Cr Cash 485 Cr Discount Rec'd 15 Trade Discounts are discounts for Trades People or for quantity purchased. FOB Shipping Point means legal title passes when the seller delivers the goods to the transport company. The buyer is responsible for the costs. FOB Destination means legal title passes when delivered to the buyer. The seller pays the costs.
COGS is the largest single expense in a retail organisation.
Under the periodic system, it is a calculation rather than an account. Your text does not use it, but we will use a COGS account to make life easier. The above journal entries ensure the correct balance is in the Inventory Account at year end. Ensure you understand how to keep perpetual records. Periodic Perpetual Purchases Dr. Purchases Dr. Inventory Cr.