Skip to ContentGo to accessibility page
OpenStax Logo
Principles of Accounting, Volume 1: Financial Accounting

Why It Matters

Principles of Accounting, Volume 1: Financial AccountingWhy It Matters
Figure 6.1 J&J Games. Proper recognition of merchandising transactions gives management a clear inventory picture to make informed business decisions. (credit: modification of “Video game retail store, consumerism at its finest” by Bas de Reuver/Flickr, CC BY 2.0)

Chapter Outline

Why It Matters

Jason and his brother James own a small business called J&J Games, specializing in the sale of video games and accessories. They purchase their merchandise from a Marcus Electronics manufacturer and sell directly to consumers.

When J&J Games (J&J) purchases merchandise from Marcus, they establish a contract detailing purchase costs, payment terms, and shipping charges. It is important to establish this contract so that J&J and Marcus understand the inventory responsibilities of each party. J&J Games typically does not pay with cash immediately and is given an option for delayed payment with the possibility of a discount for early payment. The delayed payment helps continue the strong relationship between the two parties, but the option for early payment gives J&J a monetary incentive to pay early and allow Marcus to use the funds for other business purposes. Until J&J pays on their account, this outstanding balance remains a liability for J&J.

J&J Games successfully sells merchandise on a regular basis to customers. As the business grows, the company later considers selling gaming accessories in bulk orders to other businesses. While these bulk sales will provide a new growth opportunity for J&J, the company understands that these clients may need time to pay for their orders. This can create a dilemma; J&J Games needs to offer competitive incentives for these clients while also maintaining the ability to pay their own obligations. They will carefully consider sales discounts, returns, and allowance policies that do not overextend their company’s financial position while giving them an opportunity to create lasting relationships with a new customer base.

PreviousNext
Order a print copy
Citation/Attribution
Reuse and redistribution of this content in digital or print format:
  • This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's prior written permission.
  • This book uses the Creative Commons Attribution-NonCommercial-ShareAlike License, which means that you can reuse and modify the material only for noncommercial purposes, must attribute OpenStax, and must distribute any derivative works under the same license.
  • Any commercial printing of this textbook, including using a local or custom printer, must be approved by OpenStax, and proper citation provided.
  • OpenStax-copyrighted images, activities, assessments, and similar components of this book are subject to the same licensing – CC-BY-NC-SA. They can be used for noncommercial purposes with attribution. Commercial use requires permission.
  • Permission requests: Anyone who intends to incorporate this content (including text, images, and other components) into large language models, use it in AI offerings, use it commercially (including in print), and/or has questions about another use case is welcome to complete our reuse request form.
Attribution information
  • If you are redistributing all or part of this book in a noncommercial print format, then you must include on every physical page the following attribution:

    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters

  • If you are redistributing all or part of this book in a noncommercial digital format, then for every page that includes OpenStax content, you must license the derivative work under the same CC-BY-NC-SA license as the original, and include on every digital page view the following attribution:

    Access for free at https://openstax.org/books/principles-financial-accounting/pages/1-why-it-matters

Citation information

The information below includes the information needed to generate citations in most major styles (APA, MLA, etc.); you must reformat and organize the information as needed to fit the requirements of the style. Use the information below to generate a citation. We recommend using a citation tool such as this one.

© Apr 23, 2026 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License. The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo, and Rice University name, and Rice University logo trademarks, or wordmarks are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.