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1、2020/9/8,1,Chapter 3Accounting for Merchandising Firms,2020/9/8,2,Merchandising Firms,Merchandising firms sell products to earn revenue. Merchandising firms buy goods for resale. Merchandising firms may be wholesalers or retailers. Examples: sporting goods, clothing, and auto parts stores,2020/9/8,3
2、,Fees earned$150,000 Operating expenses120,000 Net income$ 30,000,Service Business,Sales revenue$600,000 Cost of mdse. sold450,000 Gross profit$150,000 Operating expenses120,000 Net income$ 30,000,Merchandising Business,20% of revenues,5% of revenues,75% of revenues,Income Statement Comparison,2020/
3、9/8,4,Manufacturer,Wholesaler,Retailer,Customer,Merchandising Companies,Merchandising Activities,2020/9/8,5,Classified Balance Sheet,2020/9/8,6,Operating Cycle,Begins with the purchase of merchandise and ends with the collection of cash from the sale of merchandise.,2020/9/8,7,Operating Cycle Cash S
4、ale,Inventory,Sale,Purchases,2020/9/8,8,Operating Cycle Credit Sale,Inventory,Sale,Purchases,Collection,Accounts Receivable,2020/9/8,9,Perpetual,Periodic,Inventory Systems,2020/9/8,10,Periodic Inventory Systems,2020/9/8,11,Inventory,+,+,Beginninginventory,Net cost ofpurchases,Merchandiseavailable fo
5、r sale,Ending Inventory,Cost of GoodsSold,2020/9/8,12,Periodic Inventory System,Physically count inventory, usually at end of accounting period. No detailed records of the actual inventory are maintained during the accounting period. Less costly than perpetual inventory method, but provides less inf
6、ormation. Merchandising firms that sell many items of low value, such as grocery stores or bookstores like to use periodic inventory method.,2020/9/8,13,Periodic Inventory Method,Purchases,Accts. Payable,Inventory,BI xxx,xxx,xxx,Contra,Contra,When Inventory is Purchased,The Inventory Account is not
7、updated when inventory is purchased.,2020/9/8,14,Periodic Inventory Method,Entry for purchasing merchandise for resale: Purchases Cash (or Accounts Payable) See Example 6 on p81.,2020/9/8,15,Transportation Costs,FOB shipping point (buyer pays),FOB destination (seller pays),Merchandise,Seller,Buyer,2
8、020/9/8,16,Transportation Costs,When pay freight costs: Transportation In Cash ( Accounts Payable) See Example 7 on p82,2020/9/8,17,Purchase returns and allowances,Purchase Return . . . Merchandise returned by the purchaser to the supplier. Purchase Allowance . . . A reduction in the cost of defecti
9、ve merchandise received by a purchaser from a supplier.,2020/9/8,18,Purchase Returns and Allowances,Entries for receiving purchase returns and allowances from suppliers: Cash ( Accounts Payable) Purchase Returns and Allowances See Example 8 on p82,2020/9/8,19,Purchase Discounts,Terms Time Due,Discou
10、nt Period,Full amount less discount,Credit Period,Full amount due,Purchase or Sale,2020/9/8,20,Purchase Discounts,Credit terms are stated in expressions such as: 2/10, N/30, meaning that a discount of 2% is allowed if the invoice is paid within 10 days; otherwise the full (net) amount is due within
11、30 days.,2020/9/8,21,Purchase Discounts,Purchase discounts: A deduction from the invoice price granted to induce early payment of the amount due. Entries to record payment in discount period: Accounts Payable Cash Purchase Discounts See Example 9 on p83,2020/9/8,22,Net Purchases,Purchases Less: purc
12、hase discounts purchase returns and allowances = net purchases,2020/9/8,23,Periodic Inventory Method-Merchandise sale,-Entries for merchandise sale: Cash (Accounts Receivable) Sales See Example1,2,3 on p76,77 -Entries for sales returns and allowances: Sales Returns and Allowances Cash (Accounts Rece
13、ivable) Read Example 4 on p78,2020/9/8,24,Periodic Inventory Method-sales discount,Cash Sales Discounts Accounts Receivable Read Example 5 on p79 Net sales = Sales Sales Discounts Sales Returns and Allowances,2020/9/8,25,Accounting for Merchandise Sales,2020/9/8,26,Computation of CGS,Add: Transporta
14、tion In 1,000,2020/9/8,27,Itemized Cost of Merchandise Purchased,2020/9/8,28,Perpetual Inventory Systems,2020/9/8,29,Perpetual Inventory System,Continuous records are kept of the quantity and, usually, the cost of individual items as they are bought and sold. Merchandising firms that sell large item
15、s of high value, such as cars or furniture, would use perpetual inventory method.,2020/9/8,30,Perpetual Inventory System,In a perpetual inventory system, each purchase and sale of merchandise is recorded in an inventory account. In this way, the inventory records always (perpetually) disclose the am
16、ount of inventory on hand and the amount sold.,2020/9/8,31,Perpetual Inventory Method,Purchases,Accts. Pay,Pur. R terms of 2/10,n/30. The shipping terms were FOB shipping point. The shipping cost was $100. Which of the following will be part of Buyers July 6 journal entry? a. Credit Sales $7,500 b. Credit Purchase Discounts $150 c. Debit Merchandise Inventory $100 d. Debit Accounts Payable $7,450,FOB shi
