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© PHI Learning, All rights reserved.1 Financial Accounting: A Managerial Perspective Third Edition Prepared by R. Narayanaswamy Indian Institute of Management Bangalore
© PHI Learning, All rights reserved.2 Accounting for Merchandising Transactions Chapter 5
© PHI Learning, All rights reserved.3 Income Measurement for a Merchandising Company Revenue from Sales Cost of goods sold Gross profit Operating expenses Operating profit or profit before interest and tax Interest income and interest expense Net profit Chapter 5
© PHI Learning, All rights reserved.4 Revenue from Sales Gross sales Net sales Conditions for revenue recognition 1.The seller has passed the legal ownership of the goods to the buyer. 2.The selling price of the goods has been established. 3.The buyer has paid the purchase price of the goods or it is certain that the buyer will pay the price. Invoice Chapter 5
© PHI Learning, All rights reserved.5 Revenue from Sales continued Trade discounts Sales returns and allowances Sales return Sales allowance Sales discounts or cash discounts on sales Understanding standard credit terms Chapter 5
© PHI Learning, All rights reserved.6 Cost of Goods Sold Beginning inventory or opening inventory Ending inventory or closing inventory Cost of goods available for sale Cost of goods sold The periodic inventory system Net cost of purchases Purchases Purchases returns and allowances Chapter 5
© PHI Learning, All rights reserved.7 Cost of Goods Sold continued Purchases discounts or cash discounts on purchases The gross price method The net price method Deciding on discounts Freight in FOB shipping point FOB destination Inventory losses Chapter 5
© PHI Learning, All rights reserved.8 Operating Expenses Selling expenses Expenses of –storing and preparing goods for sale –promoting sales –actually making sales –delivering goods to customers Administrative expenses Expenses incurred in the overall management of a business Chapter 5
© PHI Learning, All rights reserved.9 Work Sheet for a Merchandising Company Trial Balance columns Adjustments columns Adjusted Trial Balance columns Profit and Loss Account and Balance Sheet columns Inventory accounts Determining net profit Chapter 5
© PHI Learning, All rights reserved.10 Classified Profit and Loss Account Multiple-step vs. single-step profit and loss account Key relationships: Net sales Net purchases Net cost of purchases Cost of goods sold Gross profit Operating expenses Profit before interest and tax Net profit Chapter 5
© PHI Learning, All rights reserved.11 Classified Balance Sheet Shareholders funds Loan funds Fixed assets Investments Current assets, loans and advances Current liabilities and provisions Contingent liabilities Chapter 5
Financial Accounting John J. Wild Sixth Edition John J. Wild Sixth Edition McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights.
ACCT 100 Accounting for Merchandising Operations Chapter 5.
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8 Purchasing/ Human Resources/ Payment Process: Recording.
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Home. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Owner’s equity in a corporation is called stockholders’ equity.
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Ratio Analysis Ratio Analysis: A Ratio: is defined as an arithmetical/quantitative/numerical relationship between two numbers. Ratio analysis is a very.
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©The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin Chapter 8 Consolidated Financial Statements: Intercompany Transactions.
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Merchandising Activities Chapter 6.
© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE Financial Planning Financial Records.
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1 The Profit and Loss Account (2). 2 Aims & Objectives Aims: To look further at the construction of the profit and loss account. To introduce partnership.
FINANCIAL ACCOUNTING AN INTRODUCTION TO CONCEPTS, METHODS, AND USES 12th Edition FINANCIAL ACCOUNTING AN INTRODUCTION TO CONCEPTS, METHODS, AND USES 12th.
Objective Interpret sales contracts and warranties within the rights and law of consumers. LAW OF SALES.
CH 05: Part A: Revenue Recognition Self-Study: 1. Discuss the general objective of the timing of and the two criteria for revenue recognition. SECs SAB.
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Understanding Accounting and Financial Information Chapter 17 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.
Home. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Adjustments transfer the cost of “used up” assets to expense.
Merchandise Inventory, Cost of Goods Sold, and Gross Profit Chapter 6.
1. Record a trial balance on a worksheet. 2. Complete the worksheet. 3. Prepare the income statement, statement of owners equity, and balance sheet from.
CHAPTER22 CASH FLOW STATEMENTS. 1THE NEED FOR A CASH FLOW STATEMENT Profit represents the increase in net assets in a business during an accounting period.
Measuring Banking and Insurance: The U.S. Experience Brian C. Moyer Associate Director for Industry Accounts 12 th OECD-NBS Workshop on National Accounts.
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