SlideShare uma empresa Scribd logo
1 de 72
Baixar para ler offline
ChapterChapter 66
Accounting forAccounting for
Merchandising BusinessesMerchandising Businesses
Accounting, 21st
Edition
Warren Reeve Fess
PowerPoint Presentation by Douglas Cloud
Professor Emeritus of Accounting
Pepperdine University
© Copyright 2004 South-Western, a division
of Thomson Learning. All rights reserved.
Task Force Image Gallery clip art included in this
electronic presentation is used with the permission of
NVTech Inc.
Some of the action has been automated,
so click the mouse when you see this
lightning bolt in the lower right-hand
corner of the screen. You can point and
click anywhere on the screen.
Some of the action has been automated,
so click the mouse when you see this
lightning bolt in the lower right-hand
corner of the screen. You can point and
click anywhere on the screen.
1. Distinguish the activities of a service business
from those of a merchandising business.
2. Describe and illustrate the financial statements of
a merchandising business.
3. Describe the accounting for the sale of
merchandise.
4. Describe the accounting for the purchase of
merchandise.
ObjectivesObjectivesObjectivesObjectives
After studying thisAfter studying this
chapter, you shouldchapter, you should
be able to:be able to:
After studying thisAfter studying this
chapter, you shouldchapter, you should
be able to:be able to:
5. Describe the accounting for transportation costs,
sales taxes, and trade discounts.
6. Illustrate the dual nature of merchandising
transactions.
7. Prepare a chart of accounts for a merchandising
business.
8. Describe the accounting cycle for a
merchandising business.
9. Compute the ratio of net sales to assets as a
measure of how effectively a business is using
its assets.
ObjectivesObjectivesObjectivesObjectives
Service Business
Fees earned $XXX
Operating expenses –XXX
Net income $XXX
Nature of BusinessesNature of BusinessesNature of BusinessesNature of Businesses
Merchandising Business
Sales $XXX
Cost of Merchandise Sold –XXX
Gross Profit $XXX
Operating Expenses –XXX
Net Income $XXX
Nature of BusinessesNature of BusinessesNature of BusinessesNature of Businesses
Multiple-Step
Income
Statement
Revenue from sales:
Sales $720,185
Less:Sales returns and allowances $ 6,140
Sales discounts 5,790 11,930
Net sales $708,255
Cost of merchandise sold 525,305
Gross profit $182,950
NetSolutions
Income Statement For the Year Ended
December 31, 2007
ContinuedContinued
Operating expenses:
Selling expenses:
Sales salaries expense $56,230
Advertising expense 10,860
Depr. Expense–store equipment 3,100
Miscellaneous selling expense 630
Total selling expenses $ 70,820
Administrative expenses:
Office salaries expense $21,020
Rent expense 8,100
Depr. expense–office equipment 2,490
Insurance expense 1,910
Office supplies expense 610
Misc. administrative expense 760
Total admin. expenses 34,890
Total operating expenses 105,710
Income from operations $ 77,240
ContinuedContinued
Other income and expenses:
Rent revenue $ 600
Interest expense (2,440) (1,840)
Net income $75,400
ConcludedConcluded
Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of
AccountingAccounting
Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of
AccountingAccounting
Periodic Method
• A method of determining the cost of merchandise
sold and the amount of merchandise on hand
• Under this method, the inventory records do not
show the amount available for sale or the amount
sold during the period
• Under this method, each purchase and sale of
merchandise is recorded in the inventory and the
cost of merchandise sold accounts.
• The amount of merchandise available for sale
and the amount sold are continuously disclosed in
the inventory records.
Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of
AccountingAccounting
Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of
AccountingAccounting
Perpetual Method
Cost of Merchandise PurchasedCost of Merchandise PurchasedCost of Merchandise PurchasedCost of Merchandise Purchased
Purchases $521,980
Less: Purchase returns and
allowances $9,100
Purchase discounts 2,525 11,625
Net purchases $510,355
Add transportation-in 17,400
Cost of merchandise purchased $527,755
Cost of Merchandise SoldCost of Merchandise SoldCost of Merchandise SoldCost of Merchandise Sold
Merchandise inventory, 1/1/07 $ 59,700
Purchases $521,980
Less: Purchase returns and
allowances $9,100
Purchase discounts 2,525 11,625
Net purchases $510,355
Add transportation-in 17,400
Cost of merchandise purchased 527,755
Merchandise available for sale $587,455
Less merchandise inventory, 12/31/07 62,150
Cost of merchandise sold $525,305
Single-Step Income
Statement for a
Merchandising
Business
Revenues:
Net sales $708,255
Rent revenue 600
Total revenues $708,855
Expenses:
Cost of merchandise sold $525,305
Selling expenses 70,820
Administrative expenses 34,890
Interest expense 2,440
Total expenses 633,455
Net income $ 75,400
NetSolutions
Income Statement
For the Year Ended December 31, 2007
Statement of
Owner’s Equity for
a Merchandising
Business
Chris Clark, capital, 1/1/07 $153,800
Net income for year $75,400
Less withdrawals 18,000
Increase in owner’s equity 57,400
Chris Clark, capital, 12/31/07 $211,200
NetSolutions
Statement of Owner’s Equity
For the Year Ended December 31, 2007
Balance Sheet
Assets
Current assets:
Cash $52,950
Accounts receivable 91,080
Merchandise inventory 62,150
Office supplies 480
Prepaid insurance 2,650
Total current assets $209,310
NetSolutions
Balance Sheet
December 31, 2007
ContinuedContinued
Property, plant, and equipment:
Land $20,000
Store equipment $27,100
Less accumulated
depreciation 5,700 21,400
Office equipment $15,570
Less accumulated
depreciation 4,720 10,850
Total property, plant, and
equipment 52,250
Total assets $261,560
ContinuedContinued
Liabilities
Current liabilities:
Accounts payable $22,420
Note payable (current portion) 5,000
Salaries payable 1,140
Unearned rent 1,800
Total current liabilities $ 30,360
Long-term liabilities:
Note payable (due 2017) 20,000
Total liabilities $ 50,360
Owner’s Equity
Chris Clark, capital 211,200
Total liabilities and owner’s equity $261,560
Liabilities
Current liabilities:
Accounts payable $22,420
Note payable (current portion) 5,000
Salaries payable 1,140
Unearned rent 1,800
Total current liabilities $ 30,360
Long-term liabilities:
Note payable (due 2017) 20,000
Total liabilities $ 50,360
Owner’s Equity
Chris Clark, capital 211,200
Total liabilities and owner’s equity $261,560
ConcludedConcluded
Sales TransactionsSales TransactionsSales TransactionsSales Transactions
JOURNAL
Date Description
Post.
Ref. Dr Cr.
1
2
3
4
PAGE 26
5
Jan. 3 Cash 1 800 00
2007
Sales 1 800 00
To record cash sales.
On January 3, a firm sold $1,800On January 3, a firm sold $1,800
of merchandise for cash.of merchandise for cash.
On January 3, a firm sold $1,800On January 3, a firm sold $1,800
of merchandise for cash.of merchandise for cash.
Cash SalesCash SalesCash SalesCash Sales
Cash SalesCash SalesCash SalesCash Sales
Using a perpetual inventory, the inventoryUsing a perpetual inventory, the inventory
cost of $1,200 must be recorded.cost of $1,200 must be recorded.
Using a perpetual inventory, the inventoryUsing a perpetual inventory, the inventory
cost of $1,200 must be recorded.cost of $1,200 must be recorded.
6
7
8
9
3 Cost of Merchandise Sold 1 200 00
Merchandise Inventory 1 200 00
To record the cost of
merchandise sold.
10
Credit card sales (MasterCard orCredit card sales (MasterCard or
Visa) are recorded as cash sales.Visa) are recorded as cash sales.
Credit card sales (MasterCard orCredit card sales (MasterCard or
Visa) are recorded as cash sales.Visa) are recorded as cash sales.
At the end of the month, $48 wasAt the end of the month, $48 was
sent to cover this service charge.sent to cover this service charge.
At the end of the month, $48 wasAt the end of the month, $48 was
sent to cover this service charge.sent to cover this service charge.
JOURNAL
Date Description
Post.
Ref. Dr Cr.
1
2
3
4
PAGE 28
5
Cash 48 00
Jan. 31 Credit Card Expense 48 00
2007
Cash SalesCash SalesCash SalesCash Sales
To record service charges
on credit card sales for the
month.
Jan. 12 Accounts Receivable—Sims Co. 510 00
Invoice No. 7172.
Sales 510 00
12 Cost of Merchandise Sold 280 00
Merchandise Inventory 280 00
Cost of merchandise sold
on Invoice No. 7172.
Sales on AccountSales on AccountSales on AccountSales on Account
On January 12, a firm sold Sims CompanyOn January 12, a firm sold Sims Company
merchandise on account, $510. The cost ofmerchandise on account, $510. The cost of
the merchandise to the seller was $280.the merchandise to the seller was $280.
On January 12, a firm sold Sims CompanyOn January 12, a firm sold Sims Company
merchandise on account, $510. The cost ofmerchandise on account, $510. The cost of
the merchandise to the seller was $280.the merchandise to the seller was $280.
Sales DiscountsSales DiscountsSales DiscountsSales Discounts
The terms for when payments for
merchandise are to be made are
called credit terms.
The terms for when payments for
merchandise are to be made are
called credit terms.
If buyer is allowed an
amount of time to pay, it is
known as the credit period.
If buyer is allowed an
amount of time to pay, it is
known as the credit period.
If invoice is
paid within
10 days of
invoice date
Sales DiscountsSales DiscountsSales DiscountsSales Discounts
Credit Terms
Invoice for
$1,500
Terms:
2/10, n/30
$1,470 paid (less
2% as a cash
discount)
If invoice is
NOT paid
within 10
days of
invoice date
Sales DiscountsSales DiscountsSales DiscountsSales Discounts
Credit Terms
Invoice for
$1,500
Terms:
2/10, n/30
$1,500 PAID
Sales DiscountsSales DiscountsSales DiscountsSales Discounts
On January 21, the firm receives theOn January 21, the firm receives the
amount due from Sims (refer to Slideamount due from Sims (refer to Slide
25), less the 2 percent discount.25), less the 2 percent discount.
On January 21, the firm receives theOn January 21, the firm receives the
amount due from Sims (refer to Slideamount due from Sims (refer to Slide
25), less the 2 percent discount.25), less the 2 percent discount.
Jan. 21 Cash 499 80
Accounts Receivable—Sims Co. 510 00
Sales Discounts 10 20
Collection of Invoice
No. 7172, less discount.
Sales Returns and AllowancesSales Returns and AllowancesSales Returns and AllowancesSales Returns and Allowances
Merchandise that is returned to the
vendor is referred to as a sales return.
Merchandise that is returned to the
vendor is referred to as a sales return.
If there is a defect in the product or the
wrong item was shipped, the seller
may reduce the initial price at which
the goods were sold. This is known as
a sales allowance.
If there is a defect in the product or the
wrong item was shipped, the seller
may reduce the initial price at which
the goods were sold. This is known as
a sales allowance.
Jan. 13 Sales Returns and Allowances 225 00
Credit Memo No. 32.
Accounts Receivable—Krier Co. 225 00
13 Merchandise Inventory 140 00
Cost of Merchandise Sold 140 00
Cost of merchandise
returned—Credit Memo 32.
Sales Returns and AllowancesSales Returns and AllowancesSales Returns and AllowancesSales Returns and Allowances
On January 13, issued Credit Memo 32 to KrierOn January 13, issued Credit Memo 32 to Krier
Company for merchandise returned to NetSolutions.Company for merchandise returned to NetSolutions.
Selling price, $225; cost to NetSolutions, $140.Selling price, $225; cost to NetSolutions, $140.
On January 13, issued Credit Memo 32 to KrierOn January 13, issued Credit Memo 32 to Krier
Company for merchandise returned to NetSolutions.Company for merchandise returned to NetSolutions.
Selling price, $225; cost to NetSolutions, $140.Selling price, $225; cost to NetSolutions, $140.
PurchasePurchase
TransactionsTransactions
PurchasePurchase
TransactionsTransactions
Date Description
Post.
Ref. Dr Cr.
1
2
3
4
5
Jan. 3 Merchandise Inventory 2 510 00
2007
Cash 2 510 00
Purchased inventory from
Bowen Co.
Purchase TransactionsPurchase Transactions
On January 13, Purchased merchandiseOn January 13, Purchased merchandise
for cash from Alden Company, $2,510.for cash from Alden Company, $2,510.
On January 13, Purchased merchandiseOn January 13, Purchased merchandise
for cash from Alden Company, $2,510.for cash from Alden Company, $2,510.
What’s the last
day the invoice
can be paid?
What’s the last
day the invoice
can be paid?
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
Alpha Technologies
issues an invoice for
$3,000 to
NetSolutions dated
March 12, with terms
2/10, n/30.
Alpha Technologies
issues an invoice for
$3,000 to
NetSolutions dated
March 12, with terms
2/10, n/30.
Invoice period 30
Days in March 31
Date of invoice 12
Remaining days 19
April 11
Let’s do a simple
calculation.
Let’s do a simple
calculation.
The full amount is
due on April 11.
The full amount is
due on April 11.
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
We can borrow at an annual interest rate
of 6%. Should we borrow the to pay the
invoice within the discount period?
We can borrow at an annual interest rate
of 6%. Should we borrow the to pay the
invoice within the discount period?
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
$60 discount
(2% x
$3,000)?
$60 discount
(2% x
$3,000)?
Discount $60.00
Interest for 20 days
at the rate of 6%
on $2,940 –9.80
Savings from
borrowing $50.20
Let’s see… Interest on
the amount due of $3,000
less the 2 percent…
Let’s see… Interest on
the amount due of $3,000
less the 2 percent…
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
Looks like we should take
advantage of the discount even if
we have to borrow the money.
Looks like we should take
advantage of the discount even if
we have to borrow the money.
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
Discount $60.00
Interest for 20 days
at the rate of 6%
on $2,940 –9.80
Savings from
borrowing $50.20
JOURNAL
Date Description
Post.
Ref. Dr Cr.
1
2
3
4
PAGE 27
5
On March 12, NetSolutions purchasedOn March 12, NetSolutions purchased
merchandise on account from Alphamerchandise on account from Alpha
Technologies, $3,000.Technologies, $3,000.
On March 12, NetSolutions purchasedOn March 12, NetSolutions purchased
merchandise on account from Alphamerchandise on account from Alpha
Technologies, $3,000.Technologies, $3,000.
Mar. 12 Merchandise Inventory 3 000 00
2007
Accounts Payable—Alpha
Technologies 3 000 00
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
JOURNAL
Date Description
Post.
Ref. Dr Cr.
1
2
3
4
PAGE 27
5
If payment is made by March 22 NetSolutionsIf payment is made by March 22 NetSolutions
records the discount as a reduction in cost.records the discount as a reduction in cost.
If payment is made by March 22 NetSolutionsIf payment is made by March 22 NetSolutions
records the discount as a reduction in cost.records the discount as a reduction in cost.
Mar. 22 Accounts Payable—Alpha Technol. 3 000 00
Cash 2 940 00
Merchandise Inventory 60 00
2007
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
JOURNAL
Date Description
Post.
Ref. Dr Cr.
1
2
3
4
PAGE 27
5
If NetSolutions does not pay the invoice untilIf NetSolutions does not pay the invoice until
April 11, it would pay the full amount.April 11, it would pay the full amount.
If NetSolutions does not pay the invoice untilIf NetSolutions does not pay the invoice until
April 11, it would pay the full amount.April 11, it would pay the full amount.
Apr. 11 Accounts Payable—Alpha Technol. 3 000 00
Cash 3 000 00
2007
Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances
A purchases return involves actually
returning merchandise that is
damaged or does not meet the
specifications of the order.
A purchases return involves actually
returning merchandise that is
damaged or does not meet the
specifications of the order.
When the defective or incorrect
merchandise is kept by the buyer and
the vendor makes a price adjustment,
this is a purchases allowance.
When the defective or incorrect
merchandise is kept by the buyer and
the vendor makes a price adjustment,
this is a purchases allowance.
NetSolutions received theNetSolutions received the
delivery from Maximdelivery from Maxim
Systems and determined thatSystems and determined that
$900 of the items were not$900 of the items were not
the merchandise ordered.the merchandise ordered.
DebitDebit memorandummemorandum #18 is#18 is
issued to Maxim Systems.issued to Maxim Systems.
NetSolutions received theNetSolutions received the
delivery from Maximdelivery from Maxim
Systems and determined thatSystems and determined that
$900 of the items were not$900 of the items were not
the merchandise ordered.the merchandise ordered.
DebitDebit memorandummemorandum #18 is#18 is
issued to Maxim Systems.issued to Maxim Systems.
Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances
You sent me the wrong interface
cards. We’ll send a debit
memorandum with the returned items.
You sent me the wrong interface
cards. We’ll send a debit
memorandum with the returned items.
Mar. 7 Accounts Payable—Maxim Systems 900 00
Debit Memo No. 18
Merchandise Inventory 900 00
Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances
Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances
On May 2, NetSolutions purchased $5,000
of merchandise from Delta Data Link,
subject to terms 2/10, n/30.
On May 2, NetSolutions purchased $5,000
of merchandise from Delta Data Link,
subject to terms 2/10, n/30.
May 2 Merchandise Inventory 5 000 00
Purchased merchandise.
Accounts Payable—Delta Data 5 000 00
Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances
On May 4, NetSolutions returns
$3,000 of the merchandise.
On May 4, NetSolutions returns
$3,000 of the merchandise.
May 4 Accounts Payable—Delta Data Links 3 000 00
Returned portion of
merchandise purchased.
Merchandise Inventory 3 000 00
Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances
On May 12, NetSolutions pays the amount due.On May 12, NetSolutions pays the amount due.
May 12 Accounts Payable—Delta Data Links 2 000 00
Paid invoice.
Cash 1 960 00
Merchandise Inventory 40 00
($5,000($5,000 ––
$3,000) x$3,000) x
2%2%
($5,000($5,000 ––
$3,000) x$3,000) x
2%2%
TransportationTransportation
CostsCosts
FOB Shipping PointFOB Shipping PointFOB Shipping PointFOB Shipping Point
Buyer pays freight costs and debits
Merchandise Inventory
Fruit Express
Title passes to buyer as
shipment leaves
shipping point.
Title passes to buyer as
shipment leaves
shipping point.
June 10 Merchandise Inventory 900 00
Purchased merchandise, terms
FOB shipping point.
Accounts Payable—Magna Data 900 00
10 Merchandise Inventory 50 00
Cash 50 00
Paid shipping cost .
On June 10, NetSolutions buys merchandise fromOn June 10, NetSolutions buys merchandise from
Magna Data on account, $900, terms FOB shippingMagna Data on account, $900, terms FOB shipping
point and pays the transportation cost of $50.point and pays the transportation cost of $50.
On June 10, NetSolutions buys merchandise fromOn June 10, NetSolutions buys merchandise from
Magna Data on account, $900, terms FOB shippingMagna Data on account, $900, terms FOB shipping
point and pays the transportation cost of $50.point and pays the transportation cost of $50.
FOB Shipping PointFOB Shipping PointFOB Shipping PointFOB Shipping Point
FOB DestinationFOB DestinationFOB DestinationFOB Destination
Title passes to buyer
upon arrival at
destination.
Title passes to buyer
upon arrival at
destination.
Seller pays freight costs and debits
Transportation Out
Fruit Express
On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz
Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination.
The cost of the merchandise sold is $480.The cost of the merchandise sold is $480.
NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40.
On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz
Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination.
The cost of the merchandise sold is $480.The cost of the merchandise sold is $480.
NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40.
FOB DestinationFOB DestinationFOB DestinationFOB Destination
June 15 Accounts Receivable—Kranz Co. 700 00
Sold merchandise, terms FOB
destination.
Sales 700 00
15 Cost of Merchandise Sold 480 00
Merchandise Inventory 480 00
Cost of sale of Kranz Co .
FOB DestinationFOB DestinationFOB DestinationFOB Destination
June 15 Transportation Out 40 00
Cash 40 00
Paid shipping cost on
merchandise sold.
On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz
Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination.
The cost of the merchandise sold is $480.The cost of the merchandise sold is $480.
NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40.
On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz
Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination.
The cost of the merchandise sold is $480.The cost of the merchandise sold is $480.
NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40.
Sales TaxesSales TaxesSales TaxesSales Taxes
On August 12, merchandise is sold onOn August 12, merchandise is sold on
account to Lemon Company, $100. Theaccount to Lemon Company, $100. The
state has a 6% sales tax.state has a 6% sales tax.
On August 12, merchandise is sold onOn August 12, merchandise is sold on
account to Lemon Company, $100. Theaccount to Lemon Company, $100. The
state has a 6% sales tax.state has a 6% sales tax.
Aug. 12 Accounts Receivable—Lemon Co. 106 00
Sales 100 00
Sales Taxes Payable 6 00
Invoice No. 339
Sales TaxesSales TaxesSales TaxesSales Taxes
On September 15, the seller sends in aOn September 15, the seller sends in a
payment of $2,900 to the taxing unit forpayment of $2,900 to the taxing unit for
the August taxes collected.the August taxes collected.
On September 15, the seller sends in aOn September 15, the seller sends in a
payment of $2,900 to the taxing unit forpayment of $2,900 to the taxing unit for
the August taxes collected.the August taxes collected.
Sept.15 Sales Tax Payable 2 900 00
Cash 2 900 00
Payment for sales taxes
collected during August.
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 1. Scully Company sold merchandise on accountJuly 1. Scully Company sold merchandise on account
to Burton Co., $7,500, terms FOB shipping point, n/45.to Burton Co., $7,500, terms FOB shipping point, n/45.
The cost of the merchandise sold was $4,500.The cost of the merchandise sold was $4,500.
Scully Company (Seller)
Accounts Receivable—Burton Co. 7,500
Sales 7,500
Cost of Merchandise Sold 4,500
Merchandise Inventory 4,500
Burton Company (Buyer)
Merchandise Inventory. 7,500
Accounts Payable—Scully Co. 7,500
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Scully Company (Seller)
No entry.
Burton Company (Buyer)
Merchandise Inventory 150
Cash 150
July 2. Burton Company paid transportation charges ofJuly 2. Burton Company paid transportation charges of
$150 on July 1 purchase from Scully Company.$150 on July 1 purchase from Scully Company.
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 5. Scully Company sold merchandise on accountJuly 5. Scully Company sold merchandise on account
to Burton Co., $5,000, terms FOB shipping point,to Burton Co., $5,000, terms FOB shipping point,
n/30. The cost of the merchandise sold was $3,500.n/30. The cost of the merchandise sold was $3,500.
Scully Company (Seller)
Accounts Receivable—Burton Co. 5,000
Sales 5,000
Cost of Merchandise Sold 3,500
Merchandise Inventory 3,500
Burton Company (Buyer)
Merchandise Inventory. 5,000
Accounts Payable—Scully Co. 5,000
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 7. Scully Company paid transportation costsJuly 7. Scully Company paid transportation costs
of $of $250250 for delivery of merchandise sold tofor delivery of merchandise sold to
Burton Company on July 5.Burton Company on July 5.
Scully Company (Seller)
Transportation Out 250
Cash 250
Burton Company (Buyer)
No entry.
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 13. Scully Company issued Burton Company a creditJuly 13. Scully Company issued Burton Company a credit
memorandum for $1,000 of merchandise returned from a July 5memorandum for $1,000 of merchandise returned from a July 5
purchase on account. The cost of the merchandise was $700.purchase on account. The cost of the merchandise was $700.
Scully Company (Seller)
Sales Returns and Allowances 1,000
Accounts Receivable—Burton Co. 1,000
Merchandise Inventory 700
Cost of Merchandise Sold 700
Burton Company (Buyer)
Accounts Payable—Scully Co. 1,000
Merchandise Inventory 1,000
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 15. Scully Company received paymentJuly 15. Scully Company received payment
from Burton Company for purchase of July 5.from Burton Company for purchase of July 5.
Scully Company (Seller)
Cash 4,000
Accounts Receivable—Burton Co. 4,000
Burton Company (Buyer)
Accounts Payable—Scully Co. 4,000
Cash 4,000
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 18. Scully Company sold merchandise on account to BurtonJuly 18. Scully Company sold merchandise on account to Burton
Company, $12,000, terms FOB shipping point, 2/10, n/eom. ScullyCompany, $12,000, terms FOB shipping point, 2/10, n/eom. Scully
prepaid transportation costs of $500, which were added to theprepaid transportation costs of $500, which were added to the
invoice. The cost of the merchandise sold was $7,200.invoice. The cost of the merchandise sold was $7,200.
Scully Company (Seller)
Accounts Receivable—Burton Co. 12,000
Sales 12,000
Accounts Receivable—Burton Co. 500
Cash 500
Burton Company (Buyer)
Merchandise Inventory 12,500
Accounts Payable—Scully Co. 12,500
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 18. Scully Company sold merchandise on account to BurtonJuly 18. Scully Company sold merchandise on account to Burton
Company, $12,000, terms FOB shipping point, 2/10, n/eom. ScullyCompany, $12,000, terms FOB shipping point, 2/10, n/eom. Scully
prepaid transportation costs of $500, which were added to theprepaid transportation costs of $500, which were added to the
invoice. The cost of the merchandise sold was $7,200.invoice. The cost of the merchandise sold was $7,200.
Continued (Seller)
Cost of Merchandise Sold 7,200
Merchandise Inventory 7,200
Burton Company (Buyer)
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
Illustration of Accounting forIllustration of Accounting for
Merchandise TransactionsMerchandise Transactions
July 28. Scully Company received paymentJuly 28. Scully Company received payment
from Burton Company for purchase of Julyfrom Burton Company for purchase of July
18, less discount (2% x $12,000).18, less discount (2% x $12,000).
Scully Company (Seller)
Cash 12,260
Sales Discounts 240
Accounts Receivable—Burton Co. 12,500
Burton Company (Buyer)
Accounts Payable—Scully Co. 12,500
Merchandise Inventory 240
Cash 12,260
Balance Sheet Accounts
200 Liabilities
210 Accounts Payable
211 Salaries Payable
212 Unearned Rent
215 Notes Payable
300 Owner’s Equity
310 Chris Clark, Capital
311 Chris Clark, Drawing
312 Income Summary
100 Assets
110 Cash
112 Accounts Receivable
115 Merchandise Inventory
116 Office Supplies
117 Prepaid Insurance
120 Land
123 Store Equipment
124 Accumulated Depreciation—
Store Equipment
125 Office Equipment
126 Accumulated Depreciation—
Office Equipment
NetSolutions
Chart of Accounts
Income Statement Accounts
600 Other Income
610 Rent Revenue
700 Other Expense
710 Interest Expense
400 Revenues
410 Sales
411 Sales Returns and
Allowances
412 Sales Discounts
500 Costs and Expenses
510 Cost of Merchandise Sold
520 Sales Salaries Expense
521 Advertising Expense
522 Depreciation Expense—
Store Equipment
523 Transportation Out
529 Miscellaneous Selling Expense
530 Office Salaries Expense
531 Rent Expense
532 Depreciation Expense—
Office Equipment
533 Insurance Expense
534 Office Supplies Expense
539 Miscellaneous Admin. Expense
NetSolutions
Chart of Accounts
Merchandise InventoryMerchandise Inventory
ShrinkageShrinkage
Merchandise InventoryMerchandise Inventory
ShrinkageShrinkage
NetSolutions inventory
records indicate that
$63,950 of merchandise
should be available for sale
on December 31, 2007.
The physical count reveals
that only $62,150 is
actually available.
NetSolutions inventory
records indicate that
$63,950 of merchandise
should be available for sale
on December 31, 2007.
The physical count reveals
that only $62,150 is
actually available.
Merchandise InventoryMerchandise Inventory
ShrinkageShrinkage
Merchandise InventoryMerchandise Inventory
ShrinkageShrinkage
Dec. 31 Cost of Merchandise Sold 1 800 00
Merchandise Inventory 1 800 00
Adjusting Entry
Inventory records $63,950
Inventory count 62,150
Inventory shortage $ 1,800
Profitability Measures -- Effective Use of AssetsProfitability Measures -- Effective Use of Assets
Ratio of Net Sales to AssetsRatio of Net Sales to AssetsRatio of Net Sales to AssetsRatio of Net Sales to Assets
Sears Penney
Net sales $41,366,000 $31,846,000
Total assets:
Beginning of year $50,409,000 $19,742,000
End of year $44,317,000 $20,908,000
Average $47,363,000 $20,325,000
Ratio of net sales to assetsRatio of net sales to assets .87 to 1.87 to 1 1.57 to 11.57 to 1
Ratio Use: To assess the effectiveness in the
use of assets to generate sales.
Ratio Use: To assess the effectiveness in the
use of assets to generate sales.
The EndThe End
Chapter 6Chapter 6

Mais conteúdo relacionado

Mais procurados

Chapter 2: The Recording Process
Chapter 2: The Recording ProcessChapter 2: The Recording Process
Chapter 2: The Recording Processtepsokha
 
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal controlPrincipal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal controlArfan Fahmi
 
Journalizing
JournalizingJournalizing
Journalizingjho2008
 
Accounting Principles, 12th Edition ch7
Accounting Principles, 12th Edition ch7Accounting Principles, 12th Edition ch7
Accounting Principles, 12th Edition ch7AbdelmonsifFadl
 
Ch 6 akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...
Ch 6   akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...Ch 6   akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...
Ch 6 akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...Trisdarisa Soedarto, MPM, MQM
 
Ch 3 konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...
Ch 3   konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...Ch 3   konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...
Ch 3 konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...Trisdarisa Soedarto, MPM, MQM
 
Chapter 01 - Principal Accounting (Warren Reeve Fess)
Chapter 01 - Principal Accounting (Warren Reeve Fess)Chapter 01 - Principal Accounting (Warren Reeve Fess)
Chapter 01 - Principal Accounting (Warren Reeve Fess)Arfan Fahmi
 
Chapter 1: Accounting in Action
Chapter 1: Accounting in ActionChapter 1: Accounting in Action
Chapter 1: Accounting in Actiontepsokha
 
Ch 5 sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 5   sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fessCh 5   sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 5 sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fessTrisdarisa Soedarto, MPM, MQM
 
Charts Of Accounts - Accounting
Charts Of Accounts - AccountingCharts Of Accounts - Accounting
Charts Of Accounts - AccountingAbdullah Kareem
 
Rules of debit and credit
Rules of debit and creditRules of debit and credit
Rules of debit and creditpawanrajput911
 
Accounting - Lesson 3 : The Business Transactions
 Accounting - Lesson 3 : The Business Transactions    Accounting - Lesson 3 : The Business Transactions
Accounting - Lesson 3 : The Business Transactions Elearningpower
 

Mais procurados (20)

Chapter 2: The Recording Process
Chapter 2: The Recording ProcessChapter 2: The Recording Process
Chapter 2: The Recording Process
 
Receivables
ReceivablesReceivables
Receivables
 
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal controlPrincipal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
 
Journalizing
JournalizingJournalizing
Journalizing
 
Accounting Principles, 12th Edition ch7
Accounting Principles, 12th Edition ch7Accounting Principles, 12th Edition ch7
Accounting Principles, 12th Edition ch7
 
Ch 6 akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...
Ch 6   akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...Ch 6   akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...
Ch 6 akuntansi untuk perusahaan dagang, pengantar akuntansi, edisi ke21 war...
 
Ch 3 konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...
Ch 3   konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...Ch 3   konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...
Ch 3 konsep penandingan dan proses penyesuaian, pengantar akuntansi, edisi ...
 
Ch02 - Analyzing Transactions
Ch02 - Analyzing TransactionsCh02 - Analyzing Transactions
Ch02 - Analyzing Transactions
 
Chapter 01 - Principal Accounting (Warren Reeve Fess)
Chapter 01 - Principal Accounting (Warren Reeve Fess)Chapter 01 - Principal Accounting (Warren Reeve Fess)
Chapter 01 - Principal Accounting (Warren Reeve Fess)
 
Chapter 1: Accounting in Action
Chapter 1: Accounting in ActionChapter 1: Accounting in Action
Chapter 1: Accounting in Action
 
Ch 5 sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 5   sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fessCh 5   sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 5 sistem akuntansi, pengantar akuntansi, edisi ke21 warren reeve fess
 
Correction of accounting errors
Correction of accounting errorsCorrection of accounting errors
Correction of accounting errors
 
Long Term Liabilities
Long Term LiabilitiesLong Term Liabilities
Long Term Liabilities
 
Accounting for merchandise business
Accounting for merchandise businessAccounting for merchandise business
Accounting for merchandise business
 
1. Merchandising business
1. Merchandising business1. Merchandising business
1. Merchandising business
 
Charts Of Accounts - Accounting
Charts Of Accounts - AccountingCharts Of Accounts - Accounting
Charts Of Accounts - Accounting
 
CASH AND RECEIVABLE
CASH AND RECEIVABLECASH AND RECEIVABLE
CASH AND RECEIVABLE
 
Rules of debit and credit
Rules of debit and creditRules of debit and credit
Rules of debit and credit
 
Accounting equation
Accounting equationAccounting equation
Accounting equation
 
Accounting - Lesson 3 : The Business Transactions
 Accounting - Lesson 3 : The Business Transactions    Accounting - Lesson 3 : The Business Transactions
Accounting - Lesson 3 : The Business Transactions
 

Destaque

Ch 10 aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...
Ch 10   aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...Ch 10   aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...
Ch 10 aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...Trisdarisa Soedarto, MPM, MQM
 
Week 1 akuntansi keuangan (es)
Week 1   akuntansi keuangan (es)Week 1   akuntansi keuangan (es)
Week 1 akuntansi keuangan (es)Siti Ulyah
 
Ch 8 piutang, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 8   piutang, pengantar akuntansi, edisi ke21 warren reeve fessCh 8   piutang, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 8 piutang, pengantar akuntansi, edisi ke21 warren reeve fessTrisdarisa Soedarto, MPM, MQM
 
Ch 7 pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...
Ch 7   pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...Ch 7   pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...
Ch 7 pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...Trisdarisa Soedarto, MPM, MQM
 
Pai 1 warren
Pai 1 warrenPai 1 warren
Pai 1 warrenGant Pria
 
Ch 9 persediaan, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 9   persediaan, pengantar akuntansi, edisi ke21 warren reeve fessCh 9   persediaan, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 9 persediaan, pengantar akuntansi, edisi ke21 warren reeve fessTrisdarisa Soedarto, MPM, MQM
 
Ch12 - accounting intermediate - IND
Ch12 - accounting intermediate - INDCh12 - accounting intermediate - IND
Ch12 - accounting intermediate - INDMaiya Maiya
 
Ch10 11.ppt revisi_IND_accounting Intermediate
Ch10 11.ppt revisi_IND_accounting IntermediateCh10 11.ppt revisi_IND_accounting Intermediate
Ch10 11.ppt revisi_IND_accounting IntermediateMaiya Maiya
 
Ch 2 analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 2   analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fessCh 2   analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 2 analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fessTrisdarisa Soedarto, MPM, MQM
 
Revenue ( Pengakuan Pendapatan ) Bag 2
Revenue ( Pengakuan Pendapatan ) Bag 2Revenue ( Pengakuan Pendapatan ) Bag 2
Revenue ( Pengakuan Pendapatan ) Bag 2iyandri tiluk wahyono
 
Ch11_Accounting Intermediate_IND
Ch11_Accounting Intermediate_INDCh11_Accounting Intermediate_IND
Ch11_Accounting Intermediate_INDMaiya Maiya
 

Destaque (18)

Ch 10 aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...
Ch 10   aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...Ch 10   aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...
Ch 10 aset tetap dan aset tidak berwujud, pengantar akuntansi, edisi ke21 w...
 
Week 1 akuntansi keuangan (es)
Week 1   akuntansi keuangan (es)Week 1   akuntansi keuangan (es)
Week 1 akuntansi keuangan (es)
 
Ch 8 piutang, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 8   piutang, pengantar akuntansi, edisi ke21 warren reeve fessCh 8   piutang, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 8 piutang, pengantar akuntansi, edisi ke21 warren reeve fess
 
Aset Tetap
Aset Tetap Aset Tetap
Aset Tetap
 
Analisa Kinerja Bank
Analisa Kinerja BankAnalisa Kinerja Bank
Analisa Kinerja Bank
 
Ch 7 pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...
Ch 7   pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...Ch 7   pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...
Ch 7 pengendalian internal dan kas, pengantar akuntansi, edisi ke21 warren ...
 
Mojakoe ak 1
Mojakoe ak 1Mojakoe ak 1
Mojakoe ak 1
 
Kewajiban Lancar
Kewajiban LancarKewajiban Lancar
Kewajiban Lancar
 
Pai 1 warren
Pai 1 warrenPai 1 warren
Pai 1 warren
 
Ch01 - Introduction to Accounting and Business
Ch01 - Introduction to Accounting and BusinessCh01 - Introduction to Accounting and Business
Ch01 - Introduction to Accounting and Business
 
Komunikasi Bisnis Bab 05
Komunikasi Bisnis Bab 05Komunikasi Bisnis Bab 05
Komunikasi Bisnis Bab 05
 
Ch 9 persediaan, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 9   persediaan, pengantar akuntansi, edisi ke21 warren reeve fessCh 9   persediaan, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 9 persediaan, pengantar akuntansi, edisi ke21 warren reeve fess
 
Ch12 - accounting intermediate - IND
Ch12 - accounting intermediate - INDCh12 - accounting intermediate - IND
Ch12 - accounting intermediate - IND
 
Ch10 11.ppt revisi_IND_accounting Intermediate
Ch10 11.ppt revisi_IND_accounting IntermediateCh10 11.ppt revisi_IND_accounting Intermediate
Ch10 11.ppt revisi_IND_accounting Intermediate
 
Ch 2 analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 2   analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fessCh 2   analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fess
Ch 2 analisis transaksi, pengantar akuntansi, edisi ke21 warren reeve fess
 
Revenue Bagian 1
Revenue Bagian 1Revenue Bagian 1
Revenue Bagian 1
 
Revenue ( Pengakuan Pendapatan ) Bag 2
Revenue ( Pengakuan Pendapatan ) Bag 2Revenue ( Pengakuan Pendapatan ) Bag 2
Revenue ( Pengakuan Pendapatan ) Bag 2
 
Ch11_Accounting Intermediate_IND
Ch11_Accounting Intermediate_INDCh11_Accounting Intermediate_IND
Ch11_Accounting Intermediate_IND
 

Semelhante a Ch06 accounting for merchandising business, intro accounting, 21st edition warren reeve fess eng

Accounting Lec#7.pptx
Accounting Lec#7.pptxAccounting Lec#7.pptx
Accounting Lec#7.pptxRabikaKhan2
 
Ch06 wrd25e instructor
Ch06 wrd25e instructorCh06 wrd25e instructor
Ch06 wrd25e instructorcwood
 
FINAL PROJECT 40 Congratulations! Your promotion t.docx
FINAL PROJECT 40 Congratulations! Your promotion t.docxFINAL PROJECT 40 Congratulations! Your promotion t.docx
FINAL PROJECT 40 Congratulations! Your promotion t.docxmydrynan
 
Acc week 5
Acc week 5Acc week 5
Acc week 5Shu Shin
 
Acc week 5
Acc week 5Acc week 5
Acc week 5Shu Shin
 
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions  Big Time Picture Frames h.docxDue Tues., May 2- 7 questions  Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions Big Time Picture Frames h.docxsagarlesley
 
Example 1Workshop Four Practice ExercisesExample 1 Creating Profo
Example 1Workshop Four Practice ExercisesExample 1 Creating ProfoExample 1Workshop Four Practice ExercisesExample 1 Creating Profo
Example 1Workshop Four Practice ExercisesExample 1 Creating ProfoBetseyCalderon89
 
Profit & Loss & Balance Sheet
Profit & Loss & Balance SheetProfit & Loss & Balance Sheet
Profit & Loss & Balance SheetEmma2015
 
Chart of AccountsThis chart of accounts should help you identify t
Chart of AccountsThis chart of accounts should help you identify tChart of AccountsThis chart of accounts should help you identify t
Chart of AccountsThis chart of accounts should help you identify tJinElias52
 
Cogg Hill Camping Equipment CompanyPractice SetFor Use w.docx
Cogg Hill Camping Equipment CompanyPractice SetFor Use w.docxCogg Hill Camping Equipment CompanyPractice SetFor Use w.docx
Cogg Hill Camping Equipment CompanyPractice SetFor Use w.docxmonicafrancis71118
 
Insert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docx
Insert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docxInsert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docx
Insert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docxjaggernaoma
 
Bootstrapping Entrepeneurs & Their Business Ppt
Bootstrapping Entrepeneurs & Their Business PptBootstrapping Entrepeneurs & Their Business Ppt
Bootstrapping Entrepeneurs & Their Business PptCaroline Cummings
 
Pert 8 Perusaaan Dagang
Pert 8    Perusaaan  DagangPert 8    Perusaaan  Dagang
Pert 8 Perusaaan DagangT.w. Turwanto
 
Business Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused OverviewBusiness Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused OverviewJonathan Jordan
 
Financial Accounting (Lecture 10).pptx
Financial Accounting (Lecture 10).pptxFinancial Accounting (Lecture 10).pptx
Financial Accounting (Lecture 10).pptxKhaleeqAhmed20
 
FINANCE FOR SECRETARIES.pptx
FINANCE FOR SECRETARIES.pptxFINANCE FOR SECRETARIES.pptx
FINANCE FOR SECRETARIES.pptxTawanda Chisiri
 
Financial-Stmt-Analysis-Bootcamp-Slides.pdf
Financial-Stmt-Analysis-Bootcamp-Slides.pdfFinancial-Stmt-Analysis-Bootcamp-Slides.pdf
Financial-Stmt-Analysis-Bootcamp-Slides.pdfhitishaagrawal
 
NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...
NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...
NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...NORCAT
 

Semelhante a Ch06 accounting for merchandising business, intro accounting, 21st edition warren reeve fess eng (20)

Accounting Lec#7.pptx
Accounting Lec#7.pptxAccounting Lec#7.pptx
Accounting Lec#7.pptx
 
Ch06 wrd25e instructor
Ch06 wrd25e instructorCh06 wrd25e instructor
Ch06 wrd25e instructor
 
FINAL PROJECT 40 Congratulations! Your promotion t.docx
FINAL PROJECT 40 Congratulations! Your promotion t.docxFINAL PROJECT 40 Congratulations! Your promotion t.docx
FINAL PROJECT 40 Congratulations! Your promotion t.docx
 
Acc week 5
Acc week 5Acc week 5
Acc week 5
 
Acc week 5
Acc week 5Acc week 5
Acc week 5
 
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions  Big Time Picture Frames h.docxDue Tues., May 2- 7 questions  Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
 
Ratios
RatiosRatios
Ratios
 
Example 1Workshop Four Practice ExercisesExample 1 Creating Profo
Example 1Workshop Four Practice ExercisesExample 1 Creating ProfoExample 1Workshop Four Practice ExercisesExample 1 Creating Profo
Example 1Workshop Four Practice ExercisesExample 1 Creating Profo
 
Profit & Loss & Balance Sheet
Profit & Loss & Balance SheetProfit & Loss & Balance Sheet
Profit & Loss & Balance Sheet
 
Chart of AccountsThis chart of accounts should help you identify t
Chart of AccountsThis chart of accounts should help you identify tChart of AccountsThis chart of accounts should help you identify t
Chart of AccountsThis chart of accounts should help you identify t
 
Cogg Hill Camping Equipment CompanyPractice SetFor Use w.docx
Cogg Hill Camping Equipment CompanyPractice SetFor Use w.docxCogg Hill Camping Equipment CompanyPractice SetFor Use w.docx
Cogg Hill Camping Equipment CompanyPractice SetFor Use w.docx
 
Insert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docx
Insert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docxInsert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docx
Insert Your Last Name, First InitialSPHE 314 Exercise Physiolog.docx
 
Bootstrapping Entrepeneurs & Their Business Ppt
Bootstrapping Entrepeneurs & Their Business PptBootstrapping Entrepeneurs & Their Business Ppt
Bootstrapping Entrepeneurs & Their Business Ppt
 
Pert 8 Perusaaan Dagang
Pert 8    Perusaaan  DagangPert 8    Perusaaan  Dagang
Pert 8 Perusaaan Dagang
 
Business Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused OverviewBusiness Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused Overview
 
Financial Accounting (Lecture 10).pptx
Financial Accounting (Lecture 10).pptxFinancial Accounting (Lecture 10).pptx
Financial Accounting (Lecture 10).pptx
 
Acct chapter 14
Acct chapter 14Acct chapter 14
Acct chapter 14
 
FINANCE FOR SECRETARIES.pptx
FINANCE FOR SECRETARIES.pptxFINANCE FOR SECRETARIES.pptx
FINANCE FOR SECRETARIES.pptx
 
Financial-Stmt-Analysis-Bootcamp-Slides.pdf
Financial-Stmt-Analysis-Bootcamp-Slides.pdfFinancial-Stmt-Analysis-Bootcamp-Slides.pdf
Financial-Stmt-Analysis-Bootcamp-Slides.pdf
 
NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...
NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...
NORCAT Entrepreneurship 101 - "Financial Planning & Budgetting" featuring Fre...
 

Último

Presentation on the Basics of Writing. Writing a Paragraph
Presentation on the Basics of Writing. Writing a ParagraphPresentation on the Basics of Writing. Writing a Paragraph
Presentation on the Basics of Writing. Writing a ParagraphNetziValdelomar1
 
Human-AI Co-Creation of Worked Examples for Programming Classes
Human-AI Co-Creation of Worked Examples for Programming ClassesHuman-AI Co-Creation of Worked Examples for Programming Classes
Human-AI Co-Creation of Worked Examples for Programming ClassesMohammad Hassany
 
Patterns of Written Texts Across Disciplines.pptx
Patterns of Written Texts Across Disciplines.pptxPatterns of Written Texts Across Disciplines.pptx
Patterns of Written Texts Across Disciplines.pptxMYDA ANGELICA SUAN
 
Philosophy of Education and Educational Philosophy
Philosophy of Education  and Educational PhilosophyPhilosophy of Education  and Educational Philosophy
Philosophy of Education and Educational PhilosophyShuvankar Madhu
 
Ultra structure and life cycle of Plasmodium.pptx
Ultra structure and life cycle of Plasmodium.pptxUltra structure and life cycle of Plasmodium.pptx
Ultra structure and life cycle of Plasmodium.pptxDr. Asif Anas
 
In - Vivo and In - Vitro Correlation.pptx
In - Vivo and In - Vitro Correlation.pptxIn - Vivo and In - Vitro Correlation.pptx
In - Vivo and In - Vitro Correlation.pptxAditiChauhan701637
 
Patient Counselling. Definition of patient counseling; steps involved in pati...
Patient Counselling. Definition of patient counseling; steps involved in pati...Patient Counselling. Definition of patient counseling; steps involved in pati...
Patient Counselling. Definition of patient counseling; steps involved in pati...raviapr7
 
How to Manage Cross-Selling in Odoo 17 Sales
How to Manage Cross-Selling in Odoo 17 SalesHow to Manage Cross-Selling in Odoo 17 Sales
How to Manage Cross-Selling in Odoo 17 SalesCeline George
 
What is the Future of QuickBooks DeskTop?
What is the Future of QuickBooks DeskTop?What is the Future of QuickBooks DeskTop?
What is the Future of QuickBooks DeskTop?TechSoup
 
AUDIENCE THEORY -- FANDOM -- JENKINS.pptx
AUDIENCE THEORY -- FANDOM -- JENKINS.pptxAUDIENCE THEORY -- FANDOM -- JENKINS.pptx
AUDIENCE THEORY -- FANDOM -- JENKINS.pptxiammrhaywood
 
DUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRA
DUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRADUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRA
DUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRATanmoy Mishra
 
The basics of sentences session 10pptx.pptx
The basics of sentences session 10pptx.pptxThe basics of sentences session 10pptx.pptx
The basics of sentences session 10pptx.pptxheathfieldcps1
 
P4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdf
P4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdfP4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdf
P4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdfYu Kanazawa / Osaka University
 
2024.03.23 What do successful readers do - Sandy Millin for PARK.pptx
2024.03.23 What do successful readers do - Sandy Millin for PARK.pptx2024.03.23 What do successful readers do - Sandy Millin for PARK.pptx
2024.03.23 What do successful readers do - Sandy Millin for PARK.pptxSandy Millin
 
HED Office Sohayok Exam Question Solution 2023.pdf
HED Office Sohayok Exam Question Solution 2023.pdfHED Office Sohayok Exam Question Solution 2023.pdf
HED Office Sohayok Exam Question Solution 2023.pdfMohonDas
 
Clinical Pharmacy Introduction to Clinical Pharmacy, Concept of clinical pptx
Clinical Pharmacy  Introduction to Clinical Pharmacy, Concept of clinical pptxClinical Pharmacy  Introduction to Clinical Pharmacy, Concept of clinical pptx
Clinical Pharmacy Introduction to Clinical Pharmacy, Concept of clinical pptxraviapr7
 
General views of Histopathology and step
General views of Histopathology and stepGeneral views of Histopathology and step
General views of Histopathology and stepobaje godwin sunday
 
Practical Research 1 Lesson 9 Scope and delimitation.pptx
Practical Research 1 Lesson 9 Scope and delimitation.pptxPractical Research 1 Lesson 9 Scope and delimitation.pptx
Practical Research 1 Lesson 9 Scope and delimitation.pptxKatherine Villaluna
 
M-2- General Reactions of amino acids.pptx
M-2- General Reactions of amino acids.pptxM-2- General Reactions of amino acids.pptx
M-2- General Reactions of amino acids.pptxDr. Santhosh Kumar. N
 

Último (20)

Presentation on the Basics of Writing. Writing a Paragraph
Presentation on the Basics of Writing. Writing a ParagraphPresentation on the Basics of Writing. Writing a Paragraph
Presentation on the Basics of Writing. Writing a Paragraph
 
Human-AI Co-Creation of Worked Examples for Programming Classes
Human-AI Co-Creation of Worked Examples for Programming ClassesHuman-AI Co-Creation of Worked Examples for Programming Classes
Human-AI Co-Creation of Worked Examples for Programming Classes
 
Patterns of Written Texts Across Disciplines.pptx
Patterns of Written Texts Across Disciplines.pptxPatterns of Written Texts Across Disciplines.pptx
Patterns of Written Texts Across Disciplines.pptx
 
Philosophy of Education and Educational Philosophy
Philosophy of Education  and Educational PhilosophyPhilosophy of Education  and Educational Philosophy
Philosophy of Education and Educational Philosophy
 
Ultra structure and life cycle of Plasmodium.pptx
Ultra structure and life cycle of Plasmodium.pptxUltra structure and life cycle of Plasmodium.pptx
Ultra structure and life cycle of Plasmodium.pptx
 
In - Vivo and In - Vitro Correlation.pptx
In - Vivo and In - Vitro Correlation.pptxIn - Vivo and In - Vitro Correlation.pptx
In - Vivo and In - Vitro Correlation.pptx
 
Patient Counselling. Definition of patient counseling; steps involved in pati...
Patient Counselling. Definition of patient counseling; steps involved in pati...Patient Counselling. Definition of patient counseling; steps involved in pati...
Patient Counselling. Definition of patient counseling; steps involved in pati...
 
How to Manage Cross-Selling in Odoo 17 Sales
How to Manage Cross-Selling in Odoo 17 SalesHow to Manage Cross-Selling in Odoo 17 Sales
How to Manage Cross-Selling in Odoo 17 Sales
 
What is the Future of QuickBooks DeskTop?
What is the Future of QuickBooks DeskTop?What is the Future of QuickBooks DeskTop?
What is the Future of QuickBooks DeskTop?
 
AUDIENCE THEORY -- FANDOM -- JENKINS.pptx
AUDIENCE THEORY -- FANDOM -- JENKINS.pptxAUDIENCE THEORY -- FANDOM -- JENKINS.pptx
AUDIENCE THEORY -- FANDOM -- JENKINS.pptx
 
Prelims of Kant get Marx 2.0: a general politics quiz
Prelims of Kant get Marx 2.0: a general politics quizPrelims of Kant get Marx 2.0: a general politics quiz
Prelims of Kant get Marx 2.0: a general politics quiz
 
DUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRA
DUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRADUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRA
DUST OF SNOW_BY ROBERT FROST_EDITED BY_ TANMOY MISHRA
 
The basics of sentences session 10pptx.pptx
The basics of sentences session 10pptx.pptxThe basics of sentences session 10pptx.pptx
The basics of sentences session 10pptx.pptx
 
P4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdf
P4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdfP4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdf
P4C x ELT = P4ELT: Its Theoretical Background (Kanazawa, 2024 March).pdf
 
2024.03.23 What do successful readers do - Sandy Millin for PARK.pptx
2024.03.23 What do successful readers do - Sandy Millin for PARK.pptx2024.03.23 What do successful readers do - Sandy Millin for PARK.pptx
2024.03.23 What do successful readers do - Sandy Millin for PARK.pptx
 
HED Office Sohayok Exam Question Solution 2023.pdf
HED Office Sohayok Exam Question Solution 2023.pdfHED Office Sohayok Exam Question Solution 2023.pdf
HED Office Sohayok Exam Question Solution 2023.pdf
 
Clinical Pharmacy Introduction to Clinical Pharmacy, Concept of clinical pptx
Clinical Pharmacy  Introduction to Clinical Pharmacy, Concept of clinical pptxClinical Pharmacy  Introduction to Clinical Pharmacy, Concept of clinical pptx
Clinical Pharmacy Introduction to Clinical Pharmacy, Concept of clinical pptx
 
General views of Histopathology and step
General views of Histopathology and stepGeneral views of Histopathology and step
General views of Histopathology and step
 
Practical Research 1 Lesson 9 Scope and delimitation.pptx
Practical Research 1 Lesson 9 Scope and delimitation.pptxPractical Research 1 Lesson 9 Scope and delimitation.pptx
Practical Research 1 Lesson 9 Scope and delimitation.pptx
 
M-2- General Reactions of amino acids.pptx
M-2- General Reactions of amino acids.pptxM-2- General Reactions of amino acids.pptx
M-2- General Reactions of amino acids.pptx
 

Ch06 accounting for merchandising business, intro accounting, 21st edition warren reeve fess eng

  • 1. ChapterChapter 66 Accounting forAccounting for Merchandising BusinessesMerchandising Businesses Accounting, 21st Edition Warren Reeve Fess PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.
  • 2. Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand corner of the screen. You can point and click anywhere on the screen. Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand corner of the screen. You can point and click anywhere on the screen.
  • 3. 1. Distinguish the activities of a service business from those of a merchandising business. 2. Describe and illustrate the financial statements of a merchandising business. 3. Describe the accounting for the sale of merchandise. 4. Describe the accounting for the purchase of merchandise. ObjectivesObjectivesObjectivesObjectives After studying thisAfter studying this chapter, you shouldchapter, you should be able to:be able to: After studying thisAfter studying this chapter, you shouldchapter, you should be able to:be able to:
  • 4. 5. Describe the accounting for transportation costs, sales taxes, and trade discounts. 6. Illustrate the dual nature of merchandising transactions. 7. Prepare a chart of accounts for a merchandising business. 8. Describe the accounting cycle for a merchandising business. 9. Compute the ratio of net sales to assets as a measure of how effectively a business is using its assets. ObjectivesObjectivesObjectivesObjectives
  • 5. Service Business Fees earned $XXX Operating expenses –XXX Net income $XXX Nature of BusinessesNature of BusinessesNature of BusinessesNature of Businesses
  • 6. Merchandising Business Sales $XXX Cost of Merchandise Sold –XXX Gross Profit $XXX Operating Expenses –XXX Net Income $XXX Nature of BusinessesNature of BusinessesNature of BusinessesNature of Businesses
  • 8. Revenue from sales: Sales $720,185 Less:Sales returns and allowances $ 6,140 Sales discounts 5,790 11,930 Net sales $708,255 Cost of merchandise sold 525,305 Gross profit $182,950 NetSolutions Income Statement For the Year Ended December 31, 2007 ContinuedContinued
  • 9. Operating expenses: Selling expenses: Sales salaries expense $56,230 Advertising expense 10,860 Depr. Expense–store equipment 3,100 Miscellaneous selling expense 630 Total selling expenses $ 70,820 Administrative expenses: Office salaries expense $21,020 Rent expense 8,100 Depr. expense–office equipment 2,490 Insurance expense 1,910 Office supplies expense 610 Misc. administrative expense 760 Total admin. expenses 34,890 Total operating expenses 105,710 Income from operations $ 77,240 ContinuedContinued
  • 10. Other income and expenses: Rent revenue $ 600 Interest expense (2,440) (1,840) Net income $75,400 ConcludedConcluded
  • 11. Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of AccountingAccounting Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of AccountingAccounting Periodic Method • A method of determining the cost of merchandise sold and the amount of merchandise on hand • Under this method, the inventory records do not show the amount available for sale or the amount sold during the period
  • 12. • Under this method, each purchase and sale of merchandise is recorded in the inventory and the cost of merchandise sold accounts. • The amount of merchandise available for sale and the amount sold are continuously disclosed in the inventory records. Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of AccountingAccounting Periodic vs. Perpetual Methods ofPeriodic vs. Perpetual Methods of AccountingAccounting Perpetual Method
  • 13. Cost of Merchandise PurchasedCost of Merchandise PurchasedCost of Merchandise PurchasedCost of Merchandise Purchased Purchases $521,980 Less: Purchase returns and allowances $9,100 Purchase discounts 2,525 11,625 Net purchases $510,355 Add transportation-in 17,400 Cost of merchandise purchased $527,755
  • 14. Cost of Merchandise SoldCost of Merchandise SoldCost of Merchandise SoldCost of Merchandise Sold Merchandise inventory, 1/1/07 $ 59,700 Purchases $521,980 Less: Purchase returns and allowances $9,100 Purchase discounts 2,525 11,625 Net purchases $510,355 Add transportation-in 17,400 Cost of merchandise purchased 527,755 Merchandise available for sale $587,455 Less merchandise inventory, 12/31/07 62,150 Cost of merchandise sold $525,305
  • 15. Single-Step Income Statement for a Merchandising Business
  • 16. Revenues: Net sales $708,255 Rent revenue 600 Total revenues $708,855 Expenses: Cost of merchandise sold $525,305 Selling expenses 70,820 Administrative expenses 34,890 Interest expense 2,440 Total expenses 633,455 Net income $ 75,400 NetSolutions Income Statement For the Year Ended December 31, 2007
  • 17. Statement of Owner’s Equity for a Merchandising Business
  • 18. Chris Clark, capital, 1/1/07 $153,800 Net income for year $75,400 Less withdrawals 18,000 Increase in owner’s equity 57,400 Chris Clark, capital, 12/31/07 $211,200 NetSolutions Statement of Owner’s Equity For the Year Ended December 31, 2007
  • 20. Assets Current assets: Cash $52,950 Accounts receivable 91,080 Merchandise inventory 62,150 Office supplies 480 Prepaid insurance 2,650 Total current assets $209,310 NetSolutions Balance Sheet December 31, 2007 ContinuedContinued
  • 21. Property, plant, and equipment: Land $20,000 Store equipment $27,100 Less accumulated depreciation 5,700 21,400 Office equipment $15,570 Less accumulated depreciation 4,720 10,850 Total property, plant, and equipment 52,250 Total assets $261,560 ContinuedContinued
  • 22. Liabilities Current liabilities: Accounts payable $22,420 Note payable (current portion) 5,000 Salaries payable 1,140 Unearned rent 1,800 Total current liabilities $ 30,360 Long-term liabilities: Note payable (due 2017) 20,000 Total liabilities $ 50,360 Owner’s Equity Chris Clark, capital 211,200 Total liabilities and owner’s equity $261,560 Liabilities Current liabilities: Accounts payable $22,420 Note payable (current portion) 5,000 Salaries payable 1,140 Unearned rent 1,800 Total current liabilities $ 30,360 Long-term liabilities: Note payable (due 2017) 20,000 Total liabilities $ 50,360 Owner’s Equity Chris Clark, capital 211,200 Total liabilities and owner’s equity $261,560 ConcludedConcluded
  • 23. Sales TransactionsSales TransactionsSales TransactionsSales Transactions
  • 24. JOURNAL Date Description Post. Ref. Dr Cr. 1 2 3 4 PAGE 26 5 Jan. 3 Cash 1 800 00 2007 Sales 1 800 00 To record cash sales. On January 3, a firm sold $1,800On January 3, a firm sold $1,800 of merchandise for cash.of merchandise for cash. On January 3, a firm sold $1,800On January 3, a firm sold $1,800 of merchandise for cash.of merchandise for cash. Cash SalesCash SalesCash SalesCash Sales
  • 25. Cash SalesCash SalesCash SalesCash Sales Using a perpetual inventory, the inventoryUsing a perpetual inventory, the inventory cost of $1,200 must be recorded.cost of $1,200 must be recorded. Using a perpetual inventory, the inventoryUsing a perpetual inventory, the inventory cost of $1,200 must be recorded.cost of $1,200 must be recorded. 6 7 8 9 3 Cost of Merchandise Sold 1 200 00 Merchandise Inventory 1 200 00 To record the cost of merchandise sold. 10
  • 26. Credit card sales (MasterCard orCredit card sales (MasterCard or Visa) are recorded as cash sales.Visa) are recorded as cash sales. Credit card sales (MasterCard orCredit card sales (MasterCard or Visa) are recorded as cash sales.Visa) are recorded as cash sales. At the end of the month, $48 wasAt the end of the month, $48 was sent to cover this service charge.sent to cover this service charge. At the end of the month, $48 wasAt the end of the month, $48 was sent to cover this service charge.sent to cover this service charge. JOURNAL Date Description Post. Ref. Dr Cr. 1 2 3 4 PAGE 28 5 Cash 48 00 Jan. 31 Credit Card Expense 48 00 2007 Cash SalesCash SalesCash SalesCash Sales To record service charges on credit card sales for the month.
  • 27. Jan. 12 Accounts Receivable—Sims Co. 510 00 Invoice No. 7172. Sales 510 00 12 Cost of Merchandise Sold 280 00 Merchandise Inventory 280 00 Cost of merchandise sold on Invoice No. 7172. Sales on AccountSales on AccountSales on AccountSales on Account On January 12, a firm sold Sims CompanyOn January 12, a firm sold Sims Company merchandise on account, $510. The cost ofmerchandise on account, $510. The cost of the merchandise to the seller was $280.the merchandise to the seller was $280. On January 12, a firm sold Sims CompanyOn January 12, a firm sold Sims Company merchandise on account, $510. The cost ofmerchandise on account, $510. The cost of the merchandise to the seller was $280.the merchandise to the seller was $280.
  • 28. Sales DiscountsSales DiscountsSales DiscountsSales Discounts The terms for when payments for merchandise are to be made are called credit terms. The terms for when payments for merchandise are to be made are called credit terms. If buyer is allowed an amount of time to pay, it is known as the credit period. If buyer is allowed an amount of time to pay, it is known as the credit period.
  • 29. If invoice is paid within 10 days of invoice date Sales DiscountsSales DiscountsSales DiscountsSales Discounts Credit Terms Invoice for $1,500 Terms: 2/10, n/30 $1,470 paid (less 2% as a cash discount)
  • 30. If invoice is NOT paid within 10 days of invoice date Sales DiscountsSales DiscountsSales DiscountsSales Discounts Credit Terms Invoice for $1,500 Terms: 2/10, n/30 $1,500 PAID
  • 31. Sales DiscountsSales DiscountsSales DiscountsSales Discounts On January 21, the firm receives theOn January 21, the firm receives the amount due from Sims (refer to Slideamount due from Sims (refer to Slide 25), less the 2 percent discount.25), less the 2 percent discount. On January 21, the firm receives theOn January 21, the firm receives the amount due from Sims (refer to Slideamount due from Sims (refer to Slide 25), less the 2 percent discount.25), less the 2 percent discount. Jan. 21 Cash 499 80 Accounts Receivable—Sims Co. 510 00 Sales Discounts 10 20 Collection of Invoice No. 7172, less discount.
  • 32. Sales Returns and AllowancesSales Returns and AllowancesSales Returns and AllowancesSales Returns and Allowances Merchandise that is returned to the vendor is referred to as a sales return. Merchandise that is returned to the vendor is referred to as a sales return. If there is a defect in the product or the wrong item was shipped, the seller may reduce the initial price at which the goods were sold. This is known as a sales allowance. If there is a defect in the product or the wrong item was shipped, the seller may reduce the initial price at which the goods were sold. This is known as a sales allowance.
  • 33. Jan. 13 Sales Returns and Allowances 225 00 Credit Memo No. 32. Accounts Receivable—Krier Co. 225 00 13 Merchandise Inventory 140 00 Cost of Merchandise Sold 140 00 Cost of merchandise returned—Credit Memo 32. Sales Returns and AllowancesSales Returns and AllowancesSales Returns and AllowancesSales Returns and Allowances On January 13, issued Credit Memo 32 to KrierOn January 13, issued Credit Memo 32 to Krier Company for merchandise returned to NetSolutions.Company for merchandise returned to NetSolutions. Selling price, $225; cost to NetSolutions, $140.Selling price, $225; cost to NetSolutions, $140. On January 13, issued Credit Memo 32 to KrierOn January 13, issued Credit Memo 32 to Krier Company for merchandise returned to NetSolutions.Company for merchandise returned to NetSolutions. Selling price, $225; cost to NetSolutions, $140.Selling price, $225; cost to NetSolutions, $140.
  • 35. Date Description Post. Ref. Dr Cr. 1 2 3 4 5 Jan. 3 Merchandise Inventory 2 510 00 2007 Cash 2 510 00 Purchased inventory from Bowen Co. Purchase TransactionsPurchase Transactions On January 13, Purchased merchandiseOn January 13, Purchased merchandise for cash from Alden Company, $2,510.for cash from Alden Company, $2,510. On January 13, Purchased merchandiseOn January 13, Purchased merchandise for cash from Alden Company, $2,510.for cash from Alden Company, $2,510.
  • 36. What’s the last day the invoice can be paid? What’s the last day the invoice can be paid? Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts Alpha Technologies issues an invoice for $3,000 to NetSolutions dated March 12, with terms 2/10, n/30. Alpha Technologies issues an invoice for $3,000 to NetSolutions dated March 12, with terms 2/10, n/30.
  • 37. Invoice period 30 Days in March 31 Date of invoice 12 Remaining days 19 April 11 Let’s do a simple calculation. Let’s do a simple calculation. The full amount is due on April 11. The full amount is due on April 11. Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
  • 38. We can borrow at an annual interest rate of 6%. Should we borrow the to pay the invoice within the discount period? We can borrow at an annual interest rate of 6%. Should we borrow the to pay the invoice within the discount period? Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts $60 discount (2% x $3,000)? $60 discount (2% x $3,000)?
  • 39. Discount $60.00 Interest for 20 days at the rate of 6% on $2,940 –9.80 Savings from borrowing $50.20 Let’s see… Interest on the amount due of $3,000 less the 2 percent… Let’s see… Interest on the amount due of $3,000 less the 2 percent… Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
  • 40. Looks like we should take advantage of the discount even if we have to borrow the money. Looks like we should take advantage of the discount even if we have to borrow the money. Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts Discount $60.00 Interest for 20 days at the rate of 6% on $2,940 –9.80 Savings from borrowing $50.20
  • 41. JOURNAL Date Description Post. Ref. Dr Cr. 1 2 3 4 PAGE 27 5 On March 12, NetSolutions purchasedOn March 12, NetSolutions purchased merchandise on account from Alphamerchandise on account from Alpha Technologies, $3,000.Technologies, $3,000. On March 12, NetSolutions purchasedOn March 12, NetSolutions purchased merchandise on account from Alphamerchandise on account from Alpha Technologies, $3,000.Technologies, $3,000. Mar. 12 Merchandise Inventory 3 000 00 2007 Accounts Payable—Alpha Technologies 3 000 00 Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
  • 42. JOURNAL Date Description Post. Ref. Dr Cr. 1 2 3 4 PAGE 27 5 If payment is made by March 22 NetSolutionsIf payment is made by March 22 NetSolutions records the discount as a reduction in cost.records the discount as a reduction in cost. If payment is made by March 22 NetSolutionsIf payment is made by March 22 NetSolutions records the discount as a reduction in cost.records the discount as a reduction in cost. Mar. 22 Accounts Payable—Alpha Technol. 3 000 00 Cash 2 940 00 Merchandise Inventory 60 00 2007 Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
  • 43. JOURNAL Date Description Post. Ref. Dr Cr. 1 2 3 4 PAGE 27 5 If NetSolutions does not pay the invoice untilIf NetSolutions does not pay the invoice until April 11, it would pay the full amount.April 11, it would pay the full amount. If NetSolutions does not pay the invoice untilIf NetSolutions does not pay the invoice until April 11, it would pay the full amount.April 11, it would pay the full amount. Apr. 11 Accounts Payable—Alpha Technol. 3 000 00 Cash 3 000 00 2007 Purchase DiscountsPurchase DiscountsPurchase DiscountsPurchase Discounts
  • 44. Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances A purchases return involves actually returning merchandise that is damaged or does not meet the specifications of the order. A purchases return involves actually returning merchandise that is damaged or does not meet the specifications of the order. When the defective or incorrect merchandise is kept by the buyer and the vendor makes a price adjustment, this is a purchases allowance. When the defective or incorrect merchandise is kept by the buyer and the vendor makes a price adjustment, this is a purchases allowance.
  • 45. NetSolutions received theNetSolutions received the delivery from Maximdelivery from Maxim Systems and determined thatSystems and determined that $900 of the items were not$900 of the items were not the merchandise ordered.the merchandise ordered. DebitDebit memorandummemorandum #18 is#18 is issued to Maxim Systems.issued to Maxim Systems. NetSolutions received theNetSolutions received the delivery from Maximdelivery from Maxim Systems and determined thatSystems and determined that $900 of the items were not$900 of the items were not the merchandise ordered.the merchandise ordered. DebitDebit memorandummemorandum #18 is#18 is issued to Maxim Systems.issued to Maxim Systems. Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances You sent me the wrong interface cards. We’ll send a debit memorandum with the returned items. You sent me the wrong interface cards. We’ll send a debit memorandum with the returned items.
  • 46. Mar. 7 Accounts Payable—Maxim Systems 900 00 Debit Memo No. 18 Merchandise Inventory 900 00 Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances
  • 47. Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances On May 2, NetSolutions purchased $5,000 of merchandise from Delta Data Link, subject to terms 2/10, n/30. On May 2, NetSolutions purchased $5,000 of merchandise from Delta Data Link, subject to terms 2/10, n/30. May 2 Merchandise Inventory 5 000 00 Purchased merchandise. Accounts Payable—Delta Data 5 000 00
  • 48. Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances On May 4, NetSolutions returns $3,000 of the merchandise. On May 4, NetSolutions returns $3,000 of the merchandise. May 4 Accounts Payable—Delta Data Links 3 000 00 Returned portion of merchandise purchased. Merchandise Inventory 3 000 00
  • 49. Purchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and AllowancesPurchases Returns and Allowances On May 12, NetSolutions pays the amount due.On May 12, NetSolutions pays the amount due. May 12 Accounts Payable—Delta Data Links 2 000 00 Paid invoice. Cash 1 960 00 Merchandise Inventory 40 00 ($5,000($5,000 –– $3,000) x$3,000) x 2%2% ($5,000($5,000 –– $3,000) x$3,000) x 2%2%
  • 51. FOB Shipping PointFOB Shipping PointFOB Shipping PointFOB Shipping Point Buyer pays freight costs and debits Merchandise Inventory Fruit Express Title passes to buyer as shipment leaves shipping point. Title passes to buyer as shipment leaves shipping point.
  • 52. June 10 Merchandise Inventory 900 00 Purchased merchandise, terms FOB shipping point. Accounts Payable—Magna Data 900 00 10 Merchandise Inventory 50 00 Cash 50 00 Paid shipping cost . On June 10, NetSolutions buys merchandise fromOn June 10, NetSolutions buys merchandise from Magna Data on account, $900, terms FOB shippingMagna Data on account, $900, terms FOB shipping point and pays the transportation cost of $50.point and pays the transportation cost of $50. On June 10, NetSolutions buys merchandise fromOn June 10, NetSolutions buys merchandise from Magna Data on account, $900, terms FOB shippingMagna Data on account, $900, terms FOB shipping point and pays the transportation cost of $50.point and pays the transportation cost of $50. FOB Shipping PointFOB Shipping PointFOB Shipping PointFOB Shipping Point
  • 53. FOB DestinationFOB DestinationFOB DestinationFOB Destination Title passes to buyer upon arrival at destination. Title passes to buyer upon arrival at destination. Seller pays freight costs and debits Transportation Out Fruit Express
  • 54. On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination. The cost of the merchandise sold is $480.The cost of the merchandise sold is $480. NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40. On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination. The cost of the merchandise sold is $480.The cost of the merchandise sold is $480. NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40. FOB DestinationFOB DestinationFOB DestinationFOB Destination June 15 Accounts Receivable—Kranz Co. 700 00 Sold merchandise, terms FOB destination. Sales 700 00 15 Cost of Merchandise Sold 480 00 Merchandise Inventory 480 00 Cost of sale of Kranz Co .
  • 55. FOB DestinationFOB DestinationFOB DestinationFOB Destination June 15 Transportation Out 40 00 Cash 40 00 Paid shipping cost on merchandise sold. On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination. The cost of the merchandise sold is $480.The cost of the merchandise sold is $480. NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40. On June 15, NetSolutions sells merchandise to KranzOn June 15, NetSolutions sells merchandise to Kranz Company on account, $700, terms FOB destination.Company on account, $700, terms FOB destination. The cost of the merchandise sold is $480.The cost of the merchandise sold is $480. NetSolutions pays the transportation cost of $40.NetSolutions pays the transportation cost of $40.
  • 56. Sales TaxesSales TaxesSales TaxesSales Taxes On August 12, merchandise is sold onOn August 12, merchandise is sold on account to Lemon Company, $100. Theaccount to Lemon Company, $100. The state has a 6% sales tax.state has a 6% sales tax. On August 12, merchandise is sold onOn August 12, merchandise is sold on account to Lemon Company, $100. Theaccount to Lemon Company, $100. The state has a 6% sales tax.state has a 6% sales tax. Aug. 12 Accounts Receivable—Lemon Co. 106 00 Sales 100 00 Sales Taxes Payable 6 00 Invoice No. 339
  • 57. Sales TaxesSales TaxesSales TaxesSales Taxes On September 15, the seller sends in aOn September 15, the seller sends in a payment of $2,900 to the taxing unit forpayment of $2,900 to the taxing unit for the August taxes collected.the August taxes collected. On September 15, the seller sends in aOn September 15, the seller sends in a payment of $2,900 to the taxing unit forpayment of $2,900 to the taxing unit for the August taxes collected.the August taxes collected. Sept.15 Sales Tax Payable 2 900 00 Cash 2 900 00 Payment for sales taxes collected during August.
  • 58. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 1. Scully Company sold merchandise on accountJuly 1. Scully Company sold merchandise on account to Burton Co., $7,500, terms FOB shipping point, n/45.to Burton Co., $7,500, terms FOB shipping point, n/45. The cost of the merchandise sold was $4,500.The cost of the merchandise sold was $4,500. Scully Company (Seller) Accounts Receivable—Burton Co. 7,500 Sales 7,500 Cost of Merchandise Sold 4,500 Merchandise Inventory 4,500 Burton Company (Buyer) Merchandise Inventory. 7,500 Accounts Payable—Scully Co. 7,500
  • 59. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Scully Company (Seller) No entry. Burton Company (Buyer) Merchandise Inventory 150 Cash 150 July 2. Burton Company paid transportation charges ofJuly 2. Burton Company paid transportation charges of $150 on July 1 purchase from Scully Company.$150 on July 1 purchase from Scully Company.
  • 60. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 5. Scully Company sold merchandise on accountJuly 5. Scully Company sold merchandise on account to Burton Co., $5,000, terms FOB shipping point,to Burton Co., $5,000, terms FOB shipping point, n/30. The cost of the merchandise sold was $3,500.n/30. The cost of the merchandise sold was $3,500. Scully Company (Seller) Accounts Receivable—Burton Co. 5,000 Sales 5,000 Cost of Merchandise Sold 3,500 Merchandise Inventory 3,500 Burton Company (Buyer) Merchandise Inventory. 5,000 Accounts Payable—Scully Co. 5,000
  • 61. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 7. Scully Company paid transportation costsJuly 7. Scully Company paid transportation costs of $of $250250 for delivery of merchandise sold tofor delivery of merchandise sold to Burton Company on July 5.Burton Company on July 5. Scully Company (Seller) Transportation Out 250 Cash 250 Burton Company (Buyer) No entry.
  • 62. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 13. Scully Company issued Burton Company a creditJuly 13. Scully Company issued Burton Company a credit memorandum for $1,000 of merchandise returned from a July 5memorandum for $1,000 of merchandise returned from a July 5 purchase on account. The cost of the merchandise was $700.purchase on account. The cost of the merchandise was $700. Scully Company (Seller) Sales Returns and Allowances 1,000 Accounts Receivable—Burton Co. 1,000 Merchandise Inventory 700 Cost of Merchandise Sold 700 Burton Company (Buyer) Accounts Payable—Scully Co. 1,000 Merchandise Inventory 1,000
  • 63. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 15. Scully Company received paymentJuly 15. Scully Company received payment from Burton Company for purchase of July 5.from Burton Company for purchase of July 5. Scully Company (Seller) Cash 4,000 Accounts Receivable—Burton Co. 4,000 Burton Company (Buyer) Accounts Payable—Scully Co. 4,000 Cash 4,000
  • 64. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 18. Scully Company sold merchandise on account to BurtonJuly 18. Scully Company sold merchandise on account to Burton Company, $12,000, terms FOB shipping point, 2/10, n/eom. ScullyCompany, $12,000, terms FOB shipping point, 2/10, n/eom. Scully prepaid transportation costs of $500, which were added to theprepaid transportation costs of $500, which were added to the invoice. The cost of the merchandise sold was $7,200.invoice. The cost of the merchandise sold was $7,200. Scully Company (Seller) Accounts Receivable—Burton Co. 12,000 Sales 12,000 Accounts Receivable—Burton Co. 500 Cash 500 Burton Company (Buyer) Merchandise Inventory 12,500 Accounts Payable—Scully Co. 12,500
  • 65. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 18. Scully Company sold merchandise on account to BurtonJuly 18. Scully Company sold merchandise on account to Burton Company, $12,000, terms FOB shipping point, 2/10, n/eom. ScullyCompany, $12,000, terms FOB shipping point, 2/10, n/eom. Scully prepaid transportation costs of $500, which were added to theprepaid transportation costs of $500, which were added to the invoice. The cost of the merchandise sold was $7,200.invoice. The cost of the merchandise sold was $7,200. Continued (Seller) Cost of Merchandise Sold 7,200 Merchandise Inventory 7,200 Burton Company (Buyer)
  • 66. Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions Illustration of Accounting forIllustration of Accounting for Merchandise TransactionsMerchandise Transactions July 28. Scully Company received paymentJuly 28. Scully Company received payment from Burton Company for purchase of Julyfrom Burton Company for purchase of July 18, less discount (2% x $12,000).18, less discount (2% x $12,000). Scully Company (Seller) Cash 12,260 Sales Discounts 240 Accounts Receivable—Burton Co. 12,500 Burton Company (Buyer) Accounts Payable—Scully Co. 12,500 Merchandise Inventory 240 Cash 12,260
  • 67. Balance Sheet Accounts 200 Liabilities 210 Accounts Payable 211 Salaries Payable 212 Unearned Rent 215 Notes Payable 300 Owner’s Equity 310 Chris Clark, Capital 311 Chris Clark, Drawing 312 Income Summary 100 Assets 110 Cash 112 Accounts Receivable 115 Merchandise Inventory 116 Office Supplies 117 Prepaid Insurance 120 Land 123 Store Equipment 124 Accumulated Depreciation— Store Equipment 125 Office Equipment 126 Accumulated Depreciation— Office Equipment NetSolutions Chart of Accounts
  • 68. Income Statement Accounts 600 Other Income 610 Rent Revenue 700 Other Expense 710 Interest Expense 400 Revenues 410 Sales 411 Sales Returns and Allowances 412 Sales Discounts 500 Costs and Expenses 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense— Store Equipment 523 Transportation Out 529 Miscellaneous Selling Expense 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense— Office Equipment 533 Insurance Expense 534 Office Supplies Expense 539 Miscellaneous Admin. Expense NetSolutions Chart of Accounts
  • 69. Merchandise InventoryMerchandise Inventory ShrinkageShrinkage Merchandise InventoryMerchandise Inventory ShrinkageShrinkage NetSolutions inventory records indicate that $63,950 of merchandise should be available for sale on December 31, 2007. The physical count reveals that only $62,150 is actually available. NetSolutions inventory records indicate that $63,950 of merchandise should be available for sale on December 31, 2007. The physical count reveals that only $62,150 is actually available.
  • 70. Merchandise InventoryMerchandise Inventory ShrinkageShrinkage Merchandise InventoryMerchandise Inventory ShrinkageShrinkage Dec. 31 Cost of Merchandise Sold 1 800 00 Merchandise Inventory 1 800 00 Adjusting Entry Inventory records $63,950 Inventory count 62,150 Inventory shortage $ 1,800
  • 71. Profitability Measures -- Effective Use of AssetsProfitability Measures -- Effective Use of Assets Ratio of Net Sales to AssetsRatio of Net Sales to AssetsRatio of Net Sales to AssetsRatio of Net Sales to Assets Sears Penney Net sales $41,366,000 $31,846,000 Total assets: Beginning of year $50,409,000 $19,742,000 End of year $44,317,000 $20,908,000 Average $47,363,000 $20,325,000 Ratio of net sales to assetsRatio of net sales to assets .87 to 1.87 to 1 1.57 to 11.57 to 1 Ratio Use: To assess the effectiveness in the use of assets to generate sales. Ratio Use: To assess the effectiveness in the use of assets to generate sales.