FINANCIAL ACTG. - BUS SPRING 2015 Session 8 Merchandising Operations

FINANCIAL ACTG. - BUS SPRING 2015 Merchandising Operations n Basic Flow n Purchase of Inventory n Sales of Merchandise n Inventory Systems n Merchandising Transactions n F/S Overview

FINANCIAL ACTG. - BUS SPRING 2015 Inventory Methods n Perpetual n Revenue and COGS—on-going n B + I - O = E n Periodic n Revenue only; count inventory; calculate COGS n B + I - E = O

FINANCIAL ACTG. - BUS SPRING 2015 Purchasing Transactions n Purchases n Freight and other misc. costs n Returns n Discounts

FINANCIAL ACTG. - BUS SPRING 2015 Sales Transactions n Shipment n Returns n Discounts Use contra accounts

FINANCIAL ACTG. - BUS SPRING 2015 Closing Entries n Temporary accounts n Zero them out n Revenue, expenses and dividends n Permanent accounts n Retained earnings is the final location for the temporary accounts

FINANCIAL ACTG. - BUS SPRING 2015 Merchandising Transactions n See Summary on p n Note: we do not use the Income Summary; we balance the closing entry directly into Retained Earnings

FINANCIAL ACTG. - BUS SPRING 2015 Financial Statement Overview n Multi-step Income Statement—p. 237 n Non-operating activities—p. 236 n Classified Balance Sheet—p n Statement of Shareholders’ Equity n Statement of Cash Flows

FINANCIAL ACTG. - BUS SPRING 2015 Financial Statement Preparation n Headings are IMPORTANT n Company, Title and Date n Note how the T-Account balances track to the actual financial statements

FINANCIAL ACTG. - BUS SPRING 2015 Expanded Income Statement Revenue - Cost of Goods Sold = Gross Margin - Operating expenses = Operating income +/- Other income and expense = Income before taxes - Income taxes = Net income

FINANCIAL ACTG. - BUS SPRING 2015 A Closer Look at the Balance Sheet n Current assets n Non-current assets n Current liabilities n Long-term debt n Shareholders’ equity n Contributed capital n Retained earnings n Dividends

FINANCIAL ACTG. - BUS SPRING 2015 Financial Statement Relationships Balance SheetIncome StatementStatement of Cash Flows Stmt of Sharehldrs Eq. Current Assets Non- current Assets Current Liabilities Long- term Debt Equity Revenue Cost of Goods Sold (COGS) Gross Margin Operating Exps. Net Income Operating Cash Investing Cash Financing Cash Change in Cash Beginning Cash Ending Cash Beginning S/E Net Income Less: Dividends Ending S/E

FINANCIAL ACTG. - BUS SPRING 2015 Let’s Do It! n See p. 242 n Create a Multi-step Income Statement n Create a Classified Balance Sheet n Create a Statement of Shareholder’s Equity