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1、Chapter 5 Accounting for Merchandising Operations(買賣業的會計處理)Instructor: Chih-Liang Julian LiuDepartment of Industrial and Business ManagementChang Gung UniversityChapter 5Learning Objectives1.Identify the differences between service and merchandising companies.2.Explain the recording of purchases und
2、er a perpetual inventory system (永續盤存制永續盤存制).3.Explain the recording of sales revenues under a perpetual inventory system.4.Explain the steps in the accounting cycle (會計循環會計循環) for a merchandising company.5.Prepare an income statement for a merchandiser.Preview of Chapter 5Merchandising CompaniesBuy
3、 and Sell Goods Wholesaler (批發商)Retailer (零售商)Consumer (消費者)The primary source of revenues is referred to as sales revenue or sales.Merchandising OperationsIncome MeasurementIllustration 5-1Cost of goods sold is the total cost of merchandise sold during the period.Not used in a service business.Merc
4、handising OperationsThe operating cycle of a merchandising company ordinarily is longer than that of a service company.Illustration 5-2Operating CyclesMerchandising OperationsIllustration 5-3Companies use either a perpetual inventory system or a periodic inventory system to account for inventory.Ill
5、ustration 5-4Merchandising OperationsFlow of CostsPerpetual System (永續盤存制永續盤存制)uMaintain detailed records of the cost of each inventory purchase and sale.uRecords continuously show inventory that should be on hand.uCompany determines cost of goods sold each time a sale occurs.Merchandising Operation
6、sFlow of CostsPeriodic System (定期盤存制定期盤存制)Beginning inventory$ 100,000Add: Purchases, net800,000Goods available for sale900,000Less: Ending inventory125,000Cost of goods sold$ 775,000Merchandising OperationsFlow of CostsuDo not keep detailed records of the goods on hand.uCost of goods sold determine
7、d by count at the end of the accounting period.uCalculation of Cost of Goods Sold:Additional ConsiderationPerpetual System:uTraditionally used for merchandise with high unit values.uProvides better control over inventories.uRequires additional clerical work and additional cost to maintain inventory
8、records.Merchandising OperationsFlow of CostsWholesaler (Seller)Retailer (Buyer)ConsumerSauk StereoPW AudioSupplyMerchandising OperationsuMade using cash or credit (on account). Illustration 5-6uNormally recorded when goods are received.uPurchase invoice should support each credit purchase.Recording
9、 Purchases of MerchandiseIllustration: Sauk Stereo (the buyer) uses as a purchase invoice the sales invoice prepared by PW Audio Supply, Inc. (the seller). Prepare the journal entry for Sauk Stereo for the invoice from PW Audio Supply. Inventory3,800May 4Accounts payable 3,800Illustration 5-6PERPETU
10、AL INVENTORY SYSTEMPurchases3,800May 4Accounts payable 3,800PERIODIC INVENTORY SYSTEMRecording Purchases of MerchandiseIllustration 5-7 Shipping termsSeller places goods Free On Board the carrier, and buyer pays freight costs.Seller places goods Free On Board to the buyers place of business, and sel
11、ler pays freight costs.Freight Costs (運費運費) Terms of Sale Freight costs incurred by the seller are an operating expense.Recording Purchases of MerchandiseIllustration: Upon delivery of the goods on May 6, Sauk Stereo (the buyer) pays Acme Freight Company 150 for freight charges, the entry on Sauk St
12、ereos books is:Inventory150May 6Cash 150In contrast, if the freight terms on the invoice had required PW Audio Supply (the seller) to pay the freight charges, the entry by PW Audio Supply would have been:Freight-out (Delivery expense)150May 4Cash 150PERPETUAL INVENTORY SYSTEMFreight-in (Transportati
13、on-in)150May 6Cash 150Freight CostsLO 6 Explain the recording of purchases and sales of inventory under a periodic inventory system.PERIODIC INVENTORY SYSTEMComparison of EntriesPerpetual Vs. PeriodicIllustration 5A-3APPENDIX 5A PERIODIC INVENTORY SYSTEMPurchaser may be dissatisfied because goods ar
14、e damaged or defective, of inferior quality, or do not meet specifications.Purchase Returns and Allowances (進貨退出及折讓進貨退出及折讓)Return goods for credit if the sale was made on credit, or for a cash refund if the purchase was for cash.May choose to keep the merchandise if the seller will grant an allowanc
15、e (deduction) from the purchase price.Purchase ReturnPurchase AllowanceRecording Purchases of MerchandiseIllustration: Assume that on May 8 Sauk Stereo returned to PW Audio Supply goods costing 300.Accounts payable300May 8Inventory 300PERPETUAL INVENTORY SYSTEMAccounts payable300May 8Purchase return
16、s and allowances 300Purchase Returns and AllowancesPERIODIC INVENTORY SYSTEMComparison of EntriesPerpetual Vs. PeriodicIllustration 5A-3APPENDIX 5A PERIODIC INVENTORY SYSTEMCredit terms may permit buyer to claim a cash discount (現金折扣) for prompt payment (提早付現).Advantages:uPurchaser saves money.uSell
17、er shortens the operating cycle.Purchase Discounts (進貨折扣進貨折扣) Recording Purchases of MerchandiseExample: Credit terms of 2/10, n/30, is read “two-ten, net thirty.” 2% cash discount if payment is made within 10 days.2% discount if paid within 10 days, otherwise net amount due within 30 days.1% discou
18、nt if paid within first 10 days of next month.2/10, n/301/10 EOMNet amount due within the first 10 days of the next month.n/10 EOMPurchase Discounts Recording Purchases of MerchandiseAccounts payable3,500May 14Cash 3,430Inventory 70(Discount = 3,500 x 2% = 70)Illustration: Assume Sauk Stereo pays th
19、e balance due of 3,500 (gross invoice price of 3,800 less purchase returns and allowances of 300) on May 14, the last day of the discount period. Prepare the journal entry Sauk Stereo makes to record its May 14 payment.PERPETUAL INVENTORY SYSTEMAccounts payable3,500June 3Cash 3,500Illustration: If S
20、auk Stereo failed to take the discount, and instead made full payment of 3,500 on June 3, the journal entry would be:PERPETUAL INVENTORY SYSTEMAccounts payable3,500May 14Purchase discounts 70Cash 3,430Purchase DiscountsPERIODIC INVENTORY SYSTEMComparison of EntriesPerpetual Vs. PeriodicIllustration
21、5A-3APPENDIX 5A PERIODIC INVENTORY SYSTEM3,8008th - Return300Balance4th - Purchase3,5807014th - DiscountSummary of Purchasing Transactions 1506th Freight-inRecording Purchases of MerchandiseuMade using cash or credit (on account).Illustration 5-6uNormally recorded when earned, usually when goods tra
22、nsfer from seller to buyer.uSales invoice should support each credit sale.Recording Sales of MerchandiseJournal Entries to Record a SaleCash or Accounts receivableXXXSales revenue XXX#1Cost of goods soldXXXInventory XXX#2Selling PriceCostRecording Sales of MerchandiseAccounts receivable3,800May 4Sal
23、es revenue 3,800Illustration: Assume PW Audio Supply records its May 4 sale of 3,800 to Sauk Stereo on account as follows. Assume the merchandise cost PW Audio Supply 2,400.Cost of goods sold2,400Inventory 2,400May 4PERPETUAL INVENTORY SYSTEMNo entry is recorded for cost of goods sold at the time of
24、 the sale under a periodic system.Accounts receivable3,800May 4Sales revenue 3,800Recording Sales of MerchandisePERIODIC INVENTORY SYSTEMComparison of EntriesPerpetual Vs. PeriodicAPPENDIX 5A PERIODIC INVENTORY SYSTEMIllustration 5A-3u“Flipside” of purchase returns and allowances.uContra-revenue (收入
25、減項) account (debit).uSales not reduced because:Would obscure importance of sales returns and allowances as a percentage of sales. Could distort comparisons.Sales Returns and Allowances (銷貨退回與折讓銷貨退回與折讓) Recording Sales of MerchandiseIllustration: Prepare the entry PW Audio Supply would make to record
26、 the credit for returned goods that had a 300 selling price (assume a 140 cost). Assume the goods were not defective.Sales returns and allowances 300May 8Accounts receivable300Inventory 140Cost of goods sold140May 8PERPETUAL INVENTORY SYSTEMSales returns and allowances 300May 8Accounts receivable300
27、Inventory 50Cost of goods sold50Illustration: Assume the returned goods were defective and had a scrap value of 50, PW Audio would make the following entries:May 8PERPETUAL INVENTORY SYSTEMSales returns and allowances300May 4Accounts receivable 300Sales Returns and AllowancesPERIODIC INVENTORY SYSTE
28、MComparison of EntriesPerpetual Vs. PeriodicAPPENDIX 5A PERIODIC INVENTORY SYSTEMIllustration 5A-3uOffered to customers to promote prompt payment.u“Flipside” of purchase discount.uContra-revenue (收入減項) account (debit).Sales Discount (銷貨折扣銷貨折扣)Recording Sales of MerchandiseCash3,430May 14Accounts rec
29、eivable3,500Sales discounts70* (3,800 300) X 2%*Illustration: Assume Sauk Stereo pays the balance due of 3,500 (gross invoice price of 3,800 less purchase returns and allowances of 300) on May 14, the last day of the discount period. Prepare the journal entry PW Audio Supply makes to record the rece
30、ipt on May 14.PERPETUAL INVENTORY SYSTEMSales DiscountsCash3,430May 14Accounts receivable3,500Sales discounts70PERIODIC INVENTORY SYSTEMComparison of EntriesPerpetual Vs. PeriodicAPPENDIX 5A PERIODIC INVENTORY SYSTEMIllustration 5A-3uGenerally the same as a service company. uOne additional adjustmen
31、t to make the records agree with the actual inventory on hand.uInvolves adjusting Inventory and Cost of Goods Sold.Completing the Accounting CycleAdjusting Entries Illustration: PW Audio Supply has an unadjusted balance of 40,500 in Inventory. Through a physical count, PW Audio determines that its a
32、ctual inventory at year-end is 40,000. The company would make an adjusting entry as follows.Cost of goods sold 500Inventory500Completing the Accounting CycleCompleting the Accounting CycleClosing EntriesCompleting the Accounting CycleClosing EntriesuPrimary source of information for evaluating a com
33、panys performance. uFormat is designed to differentiate between the various sources of income and expense.Income StatementForms of Financial StatementsIllustration 5-14Income Statement Presentation of SalesForms of Financial StatementsKey Items:uNet salesIncome StatementForms of Financial Statements
34、Illustration 5-14Key Items:uNet salesuGross profitIncome StatementForms of Financial StatementsIllustration 5-14Income StatementKey Items:uNet salesuGross profituGross profit rateForms of Financial StatementsIllustration 5-14Key Items:uNet salesuGross profituOperating expensesIncome StatementForms o
35、f Financial StatementsIllustration 5-14Key Items:uNet salesuGross profituOperating expensesuOther income and expenseIncome StatementForms of Financial StatementsIllustration 5-14Key Items:uNet salesuGross profituOperating expensesuOther income and expenseuInterest expenseIncome StatementForms of Fin
36、ancial StatementsIllustration 5-14Key Items:uNet salesuGross profituOperating expensesuOther income and expenseuInterest expenseuNet incomeIncome StatementForms of Financial StatementsIllustration 5-14Comprehensive Income (綜合淨利綜合淨利)Includes certain adjustments to pension plan assets, gains and losse
37、s on foreign currency translation, and unrealized gains and losses on certain types of investments.Reported in a combined statement of net income and comprehensive income, or in a separate schedule that reports only comprehensive income.Illustration 5-15Forms of Financial StatementsIllustration 5-16Classified Statement of Financial PositionForms of Financial Statements
