survey 5e ch4_lecture
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Chapter 4Chapter 4
Accounting for Merchandising Accounting for Merchandising BusinessesBusinesses
Accounting for Merchandising Accounting for Merchandising BusinessesBusinesses
Learning ObjectivesLearning Objectives
After studying this chapter, you should be able to… Distinguish the activities and financial statements of a service
business from those of a merchandising business Describe and illustrate the financial statements of a
merchandising business Describe the accounting for the sale of merchandise Describe the accounting for the purchase of merchandise Describe the accounting for transportation costs and sales taxes Illustrate the dual nature of merchandising transactions Describe the accounting for merchandise shrinkage
Learning Objective 1Learning Objective 1
Distinguish the activities and financial statements of a service business from
those of a merchandising business
Service Businesses vs. Merchandise Operations
• Merchandise Operations– Revenue activities involve the buying
and selling of merchandise.– Example: Home Depot Inc.
• Service Businesses– Revenue activities involve providing
services to customers.– Example: Family Health Care, P.C.
Gross Profit for a Merchandise Operation
Gross Profit = Net Sales – COGSGross Profit = Net Sales – COGS
• Net Sales: revenue less returns and discounts
• Cost of Goods Sold: cost paid for merchandise
Learning Objective 2Learning Objective 2
Describe and illustrate the financial statements of a merchandising
business
NetSolutions – Multiple-Step Income Statement
Measures income/loss from the core operations
of the business
Assume a perpetual inventory system
Considers customer
returns and discounts
NetSolutions – Cost of Merchandise Sold – Periodic Inventory
NetSolutions – Income Statement
NetSolutions – Retained Earnings Statement
NetSolutions – Balance Sheet
Value of units on hand, not sold
NetSolutions – Statement of Cash Flows
Equals cash on balance sheet
Learning Objective 3Learning Objective 3
Describe the accounting for the sale of merchandise
NetSolutions - Sales Transactions
Sample Sales Invoice
Credit terms
Sales Discounts
NetSolutions - Sales Discounts
Sales Returns and Allowances
NetSolutions - Sales Returns and Allowances
Learning Objective 4Learning Objective 4
Describe the accounting for the purchase of merchandise
Purchase Transaction - Using the Perpetual System
Purchase Discounts
Purchase Returns and Allowances
NetSolutions - Return of Merchandise
Learning Objective 5Learning Objective 5
Describe the accounting for transportation costs and sales taxes
Transportation Costs
NetSolutions - Transportation Costs
Sales Taxes
Sale is made, liability for sales tax
recorded as an obligation of the
seller
Payment is made to state taxing
authority to satisfy obligation
Learning Objective 6Learning Objective 6
Illustrate the dual nature of merchandising transactions
Dual Nature of Merchandise Transactions
Company A Company A records a salerecords a saleCompany A Company A records a salerecords a sale
Company B Company B records a purchaserecords a purchase
Company B Company B records a purchaserecords a purchase
Learning Objective 7Learning Objective 7
Describe the accounting for merchandise shrinkage
Merchandise Shrinkage
NetSolutions - Merchandise Shrinkage
End of Chapter 4End of Chapter 4